Asme hopes for new and expanded grants, risk-sharing for internationalisation in Budget 2024

TO HELP Singapore’s smaller companies through tough times, Budget 2024 could extend existing grants and introduce new ones, suggested the Association of Small and Medium Enterprises (Asme).

These were among recommendations that Asme submitted to the government last December, alongside tax incentives for buying green goods from local suppliers, and government risk-sharing for loans for overseas expansion.

This was ahead of Budget 2024, which will be delivered on Feb 16 in Parliament by Deputy Prime Minister and Finance Minister Lawrence Wong.

Derived from focus group discussions and meetings with SMEs from different sectors, Asme’s recommendations cover five areas: manpower; digitalisation; internationalisation; sustainability; and grants, incentives and schemes.

Manpower: Improving skills, boosting image

With technological disruptions making new skills indispensable, Asme suggested a top-up to the SkillsFuture Enterprise Credit scheme, to sustain it for at least another three years.

The scheme provides a one-off credit of up to S$10,000, covering up to 90 per cent of qualifying expenses for enterprise and workforce transformation. Introduced in Budget 2020 with the aim of helping over 35,000 enterprises, the scheme was expanded in Budget 2022 to cover 80,000 enterprises.

The scheme could also be renewed such that SMEs which have already tapped the credit can use it a second time, said Asme president Ang Yuit.

Apart from specific talent shortages, SMEs face a general challenge in hiring workers, said Asme. “Student and university graduate first-time job seekers are under the impression that SMEs are poorly run, pay badly, and offer no prospects for their career futures.”

To combat this perception, Budget 2024 could fund outreach campaigns and other initiatives to boost the image of SMEs, it suggested.

Digitalisation: Extended and new grants

The long-running Productivity Solutions Grant (PSG) has been effective in getting firms to go digital, said Asme, but its maximum funding level was lowered last April, to 50 per cent of qualifying expenditure. This is down from 70 to 80 per cent earlier.

With the reduction, Asme has seen “a pullback” in SMEs undertaking business transformation, said Ang. Some wanted to embark on such projects but stopped because funding was lowered.

It would therefore be helpful if funding support was restored to previous highs, particularly in emerging areas like artificial intelligence (AI), he said.

Besides improving existing grants, new grants could be created. Asme proposed that Budget 2024 fund a new cybersecurity grant, administered by trade associations and chambers to educate their members.

This is as SMEs tend to have limited expertise and resources in combating online threats, even as they face more attacks, said Asme.

Internationalisation: Promote collaboration

Large local enterprises and government-linked companies can play a role in helping SMEs internationalise, noted Ang.

To that end, Asme suggested a pilot project grant administered by trade associations. This would fund SMEs to pitch for pilot projects with those larger players. The same grant could also support pilot projects in which SMEs bid for overseas contracts, whether individually or as consortiums.

Asme also called on the government to underwrite some risk for bank loans that SMEs take out for internationalisation.

This would be in line with existing risk-sharing arrangements under the Enterprise Financing Scheme, Ang noted.

Under the scheme, the government takes on 50 to 70 per cent of the risk, depending on the type of loan and profile of the borrower. The scheme currently covers seven areas, such as green projects and working capital, but not internationalisation specifically.

Sustainability: New tax incentives

Tax incentives could be introduced to encourage SMEs to use greener supplies, said Asme.

This will support them through the initial transition, as per-unit costs for green goods tend to be higher at the start. It will also drive demand for suppliers of greener products – many of whom are SMEs themselves, Ang said.

Where possible, the government should also encourage SMEs to incorporate environmental, social, and corporate governance (ESG) concepts in their operations. For instance, SMEs that include ESG factors in government grant applications – even if this is not required – could be given more funding.

Such an initiative would be a good stepping stone for SMEs to adopt ESG practices, Ang said.

Grants, incentives and schemes: More funding

Aside from the PSG, the other key grant that SMEs tap for digitalisation and innovation is the Enterprise Development Grant (EDG), Ang said. Introduced in Budget 2018, it funds SMEs to upgrade their business, explore new growth, or expand overseas.

As with the PSG, maximum funding support for the EDG was lowered to 50 per cent on Apr 1, 2023, from 70 to 80 per cent previously. Sustainability-related projects are the exception, with support of up to 70 per cent till Mar 31, 2026.

“From feedback on the ground, a grant quantum of 50 per cent for typical EDG-sized projects that SMEs embark on barely offsets the costs of the audit, paperwork, management work that is involved for such projects,” Asme said.

It suggested a higher support level for EDG projects with desired elements such as AI.

The Budget could also re-introduce “EDG Lite” projects with grant quantums of less than S$50,000, which were discontinued a few years ago. These had a simpler application and audit process, allowing SMEs to bridge their digitalisation needs more quickly and easily, Asme said.

For more of BT’s Budget 2024 coverage, go to bt.sg/budget24