No broad-based subsidies for SMEs in Budget 2023, but some scheme renewals possible: analysts

SINGAPORE’S small and medium-sized enterprises (SMEs) should not expect general subsidies in Budget 2023 – as the country emerges from the pandemic – but existing schemes for sustainability, internationalisation and innovation are likely to be extended, said economists and industry players.

The days of Covid-era support are over. Direct subsidies in recent Budgets – such as for manpower and rental, in sectors including food and beverage (F&B) services – were for tackling challenges that have “largely disappeared”, said Goh Puay Guan, associate professor (practice track) at the National University of Singapore (NUS) Business School’s department of analytics and operations.

“Unlike the Covid-19 impact where certain industries such as F&B, hospitality and tourism were more disproportionately affected, we are likely to see a more conventional macroeconomic impact across industries (in this Budget),” Prof Goh added.

Budget 2023 is likely to be “prudent and calibrated”, as there is a need for fiscal consolidation after the “substantial” amount of fiscal bullets used during the pandemic, DBS senior economist Irvin Seah told The Business Times (BT). Under the Constitution, the government must keep a balanced budget over its term, with the next General Election to be held by 2025.

The “most welcome” form of support for SMEs is likely to be cash grants such as the Small Business Recovery Grant, said OCBC chief economist Selena Ling. Announced in last year’s Budget with payouts in June and November, the scheme has officially ended.

Ling said it is possible that the government will be “generous” and extend the grant for another year, though it should still be rolled back as tourism recovers.

Schemes which encourage specific business behaviour, however, are more likely to be extended. BT looks at three grants that are due to expire or have support levels lowered at the end of March 2023.

Energy Efficiency Grant (EEG)

The EEG was introduced in June 2022 to help firms cope with rising energy costs in the wake of Russia’s war in Ukraine, with applications open till Mar 31 this year.

Capped at S$30,000 per company per year, it provides up to 70 per cent funding for the adoption of pre-approved, energy-efficient equipment by SMEs in the food services, food manufacturing, and retail sectors.

In its Budget 2023 recommendations released in November, the Singapore Business Federation’s SME Committee (SMEC) called for the EEG to be expanded beyond these three sectors.

This was one of several “transitionary support” measures proposed to ease cost pressures for SMEs, especially in “cost areas which are not largely within their control”. Said the SMEC: “One such area is utilities, where the adoption of energy-efficient equipment offers a potential upside for companies regardless of sector.”

Market Readiness Assistance (MRA) grant

This long-running grant was introduced in 2013 to encourage SMEs to go overseas. In 2015, the maximum support level was raised to 70 per cent of eligible costs, from 50 per cent originally.

This higher support level was extended several times after it was meant to expire. Currently, there is also a higher grant limit of S$100,000 per company per new market – from S$20,000 before – and a temporary lifting of the annual cap of two applications per company.

These enhancements are set to end on Mar 31, with the grant returning to previous levels. But DBS’s Seah said that such internationalisation initiatives need to be renewed, or even enhanced: “Even China is also catching up on (the) reopening of its economy. So this also provides opportunities for SMEs if they’re considering internationalisation.”

The SMEC recommended an extension of the current support level through Oct 31; a review of the cap, to reflect rising costs; and a longer grant duration in regulated industries. They also suggested that the grant could cover manpower costs for the relevant overseas activities.

Productivity Solutions Grant (PSG)

Launched in 2018, the PSG co-funds the adoption of IT solutions and equipment to enhance productivity, and covers both general and sector-specific solutions.

The general maximum support level is 70 per cent. The food services and retail sectors have enhanced support of up to 80 per cent, but this is set to end on Mar 31.

While this higher support level may not be extended, trade associations have proposed other enhancements.

The PSG is a “very good” grant for SMEs, and could be enhanced further with more flexibility in how and when it is disbursed, said Association of Small and Medium Enterprises vice-president Ang Yuit.

He also suggested introducing a vendor rating system so that SMEs can provide feedback on the goods and services procured with the aid of the grant. “I think a lot of the grants work very well, (but) there are cases where some of the experiences of companies are not so great,” he said.

Another suggestion, by the SMEC, is a one-off top-up of the PSG, specifically for adopting sustainability solutions and tools. This would particularly aid SMEs that have exhausted their grant cap. For instance, SMEs face an annual grant cap of S$30,000 for solutions supported by Enterprise Singapore.

New targeted schemes

Aside from ongoing schemes, Prof Goh expects that Budget 2023 could include new initiatives to help SMEs innovate, go digital, and expand into new markets.

Sustainability is another area where the government could further explore aiding SMEs, Ang said: “The sustainability side is still very high-level, broad, and impacts mainly the larger enterprises through things like carbon credits and offsets.”

“So how we support and strengthen the implementation and execution of this for SMEs is something that we hope will also have programmes and support.”

But DBS’ Seah cautioned that the upcoming Budget is unlikely to be “exceptionally generous”, saying: “I do not foresee that the government will roll out the big cannons. We are definitely not in the same kind of economic conditions compared to a few years ago during the Covid crisis.”