The Singapore Budget 2023 announced in February promises novel opportunities and support for startups, as well as sustainability solutions, to cope with climate change challenges. Deputy Prime Minister and Finance Minister Mr Lawrence Wong delivered it to parliament with the theme “Moving Forward in a New Era”.
According to Mr Wong, the new budget is about the nation-state charting a way forward after three years of dealing with the challenges brought by the COVID-19 pandemic. The budget outlines several vital approaches for securing a brighter future for the country. It focuses on supporting businesses and workers, providing social support for the citizens, and building Singapore’s resilience to handle problems.
VC trends in Singapore: We examine the dip in the funds raised from IPOs in Southeast Asia
Startups in Singapore are facing many issues in 2023, from possible recession, controlling inflation, and spurring economic growth to navigate supply chain disruptions and increasing customer expectations. Furthermore, the nation-state has a tech talent shortage, similar to other countries in the Association of Southeast Asian Nations (ASEAN). There is an urgent need to upskill or retrain workers. Adapting to innovative digital technologies is taking a long time, and the demand for sustainable solutions for different sectors is also a significant issue.
Key highlights from Singapore budget 2023
With the prospect of a global recession looming large, Singapore would be one of the first countries affected if the United States went into recession. The country relies heavily on exports, and a recession would negatively impact its Gross Domestic Product (GDP). Similarly, its startup ecosystem would suffer from such an economic downturn, with funding diminishing and smaller firms unable to survive.
Thus, the budget reading came at an ideal time to show Singaporeans that they had a cushion and could focus on developing themselves and their nation. First, Mr Wong announced financial support measures for citizens to deal with the rising living costs. People aged 21-54 would receive up to USD 1,700, and those aged 55 and above would get USD 2,300. Having extra cash in their pocket would enable people to continue buying, and startups would be able to generate more revenue.
Secondly, the budget provided an outline for growing the economy, remaining competitive, creating job opportunities, and upskilling workers. The Minister set aside USD 1 billion for the Singapore Global Enterprises Initiative. This money would provide customised support for local enterprises. Promising small and medium-sized enterprises (SMEs) would receive an additional USD 150 million under the SME Co-Investment Fund.
The budget set aside USD 4 billion for the National Productivity Fund to help with investment promotion. To nurture and sustain innovation, Mr Wong introduced an Enterprise Innovation Scheme that uses tax deductions and other measures to encourage business innovation. For the 2023 budget, there will be a tax deduction of 400% for qualifying research and development costs for the first SGD 400,000.
In addition, he extended the deadline for the Enterprise Financing Scheme till next year. This scheme provides startups with access to credit. The Singaporean government takes a 70% risk share for trade loans. It also issues project loans for domestic construction projects. Furthermore, it will offer working capital loans for startups that need them.
Thirdly, the government delivers employee support through the Progressive Wage Credit Scheme. It helps lower-wage workers and will be topped up using USD 2.4 billion. Three Employment Credit Funds exist for seniors, part-time workers, disabled people, and ex-convicts. ASEAN needs more tech talents, so there is a need to reskill and upskill those who need specialised skills.
Another benefit focuses on healthcare. The budget sets aside USD 500 million for the ElderCare Fund. Lower-wage workers and seniors struggling to pay their medical bills can access the USD 1.5 billion MediFund. These changes will benefit the health technology (healthtech) sector enabling startups to form and offer innovative solutions.
Achieving resilience and sustainability
Mr Wong extended the Energy Efficiency Grant to March of next year to enable SMEs in the Retail sector, Food Services, and Food Manufacturing to acquire energy-efficient equipment. These new tools help startups to save money by spending less on electricity. Moreover, they are helping the country reach its goal of net zero emissions by 2050.
Singapore is part of the Glasgow Financial Alliance for Net Zero (GFANZ), a global coalition of financial institutions whose mission is to achieve net zero while also meeting the needs of Southeast Asians. Working towards a green economy creates job opportunities for startups looking to solve issues like food insecurity. While decarbonisation helps the environment, it is also a good job opportunity.
The Singapore budget 2023 shows that startups in Singapore are receiving support to navigate the complex global economic downturn while innovating and creating solutions for the country. Achieving sustainability in many sectors will require unwavering effort, but it will bring rewards in the long run in business and for the environment.