The year 2020 saw Singapore’s worst recession since Independence and the economy shrank by 5.4 %. The previous year’s governmental investment, spread over five budgets, tapped the nation’s reserves in an attempt to combat the extra pressures on the economy from COVID-19, holding off potentially much more significant losses.
As such, the post-pandemic “Emerging Stronger Together Budget” has been much anticipated, with hopes these budget trends of investment into the growing sectors would continue. The budget had very clear goals; to innovate and expand. Singapore’s government will invest over $18 Billion USD in the coming three years to invigorate regional and local businesses, encouraging them to innovate and make a successful transition to the post-pandemic economic environment.
Government support for the startup ecosystem
Finance Minister and Deputy Prime Minister Heng Swee Keat announced in the Singapore 2021 budget new initiatives geared towards stimulating both startups and small and medium enterprises (SMEs) in an attempt to strengthen the country’s role as a global hub in the post-pandemic landscape.
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The budget proposes continued investment to help boost innovation and competition. Through a new Corporate Venture LaunchPad and the Open Innovation Platform, the government offers a support framework to encourage startups to launch. These supports, combined with improved intellectual property laws, will help secure the higher-risk technology investments they hope to attract.
The LaunchPad will provide an incubator environment that encourages new ideas and new ventures. One of its primary roles will be to encourage new investors, especially larger companies, to get into or renew an interest in the startup landscape.
Parallel to the investment in the LaunchPad, the government will expand the existing Open Innovation Platform to include a cloud-based Digital Bench to provide digital marketing and the innovation of tech content and strategy. This will enable partnering and networking for successful ventures.
To aid with these supports and encourage further growth security for the startups, The National Research Foundation will launch 500 fellowships. These positions will be aimed at the core of the sector and focus on deeptech like Artificial Intelligence (AI), cybersecurity, and healthtech.
In recent years Singapore’s budgets have helped relieve a shortage of investment capital in its technology development sector. The current venture debt programme will be extended and enhanced—with an increase in the cap support from $5 million SGD to $8 million SGD to ensure that a lack of capital is not a factor in the financial year ahead for the developing deeptech sector.
Perhaps the biggest indicator of the extent of state financial support is the government, in some cases, taking up to 70% of the loan risk on behalf of the investing companies. This creates a very attractive financial package for potential investors and startups alike.
Budgeting for a brighter future
The 2021 budget continues the trends of previous years, with the administration tackling issues head-on and trying to prevent the country from sliding towards recession. In light of the game-changing pandemic, they are looking at investing in training the workforce to adapt to a post-COVID workforce.
Singapore is allocating $18.1 Billion USD over the next three years to facilitate existing and new startup companies in the island-nation to innovate and build the skills and knowledge required to facilitate the next level of development and transformation. The investment will primarily bolster a range of co-funded initiatives, especially those focussed on emergent technology, including the eCommerce, fintech, 5G, AI and cybersecurity sectors. This investment, aimed at partnerships within Singapore, will also aid further partnership integration within the ASEAN area.
Minister Heng explained the government is investing in accelerating structural adaptations and said: “we must move from just counter-cyclical fiscal and monetary stabilisation policies to structural economic policies to equip our businesses and workers with deep and future-ready capabilities.”
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The minister further explained that recent budget trends, and especially last year’s series of budgets, have been a reaction to both the economic difficulties and, in no small part, due to the accentuation of these difficulties and the advent of many more because of the pandemic. The emphasis in this latest budget iteration, is the proactive measures within the context of the current economic environment and the need to readjust both the economy and the workforce in a post-COVID world.
The pandemic has introduced a new way of working for many employees, and in Southeast Asia, the pandemic has accelerated existing global remote working trends. The move towards eCommerce, deeptech, fintech, and other emerging sectors has been in the spotlight over the past five years. However, we have seen a significant increase in development and innovation in the last year that will probably remain after the pandemic’s immediate behavioural effect subsides. The Singapore Budget 2021 acknowledges the past and the present but has its objectives firmly in the future.