The Singapore Budget 2025 has now been presented by the Prime Minister and Minister for Finance Lawrence Wong to the parliament, promising to empower small and medium-sized enterprises (SMEs) to thrive and handle competition in Southeast Asia. The theme for this year is “Onward Together for a Better Future Tomorrow”.
The new Budget continues last year’s work, enabling SMEs in Singapore to tackle various challenges, stay competitive, and expand to other countries. Budget 2024 had the theme of “Building Our Shared Future Together”, which aimed to provide relief to Singaporeans due to the flailing global economy and a local one on the verge of recession. It also wanted to address geopolitical, energy, and supply chain risks to enhance businesses and uplift workers.
We explore Southeast Asia’s position to become a hub for eMobility
Singapore’s SMEs face several challenges in scaling and staying competitive, especially as they look to expand regionally, including:
High operational costs
Singaporeans have been under tremendous financial stress due to the global inflation brought about by the Ukraine war and face higher rent and labour costs. The city-state also endured high food and energy costs and supply chain disruptions, which increased prices and business operational expenses.
The high costs of doing business and the need for Singaporeans to tighten their belts have meant that companies have not been profitable, have struggled with cash flow issues, and have been unable to invest in innovations or operations scaling.
Intense competition from local and international players
Inadequate research and development (R&D) funding has meant fewer innovations, limiting companies’ ability to compete in the regional markets. Startup funding also dipped last year, preventing budding businesses from establishing themselves and bringing solutions to the public.
Furthermore, international players are becoming more advanced in sectors like artificial intelligence (AI), meaning Singaporean companies have an uphill battle to keep up with or exceed their global rivals. Relevant stakeholders must find ways of encouraging investment from local, regional, and international venture capital (VC) firms for the city-state to remain competitive.
Regulatory and cultural differences across markets
The Association of Southeast Asian Nations (ASEAN) is a hotbed of cultural, social, religious, and language variations. These differences prevent startups from operating seamlessly outside their nations. Company leaders must align their businesses better in the regional countries they wish to operate in so that they can compete with local organisations.
Additionally, regulatory differences in ASEAN mean that companies must have adequate resources to expand to new regions, be willing to adapt to local government policies and consider partnering or merging with local businesses to make the transition smoother.
How can Budget 2025 measures help SMEs with expansion?
Mr Wong said he would invest in world-class infrastructure for Singapore to thrive as a hub economy. It would include measures like topping up the Changi Airport Development Fund by SGD 5 billion. There would also be money set aside for upgrading the Nationwide Broadband Network to make 5G deliver speeds up to 10 times faster.
The Singapore government will provide benefits to businesses, such as the Corporate Income Tax (CIT) Rebate and Cash Grant and the Progressive Wage Credit Scheme (PWCS) to support employers and raise worker wages.
Furthermore, M&A schemes will provide funding to enable companies to expand across ASEAN. Examples include The Market Readiness Assistance (MRA) grant and The Double Tax Deduction for Internationalisation (DTDi) scheme. SMEs can also access the Enterprise Financing Scheme (EFS). The Merger & Acquisition (M&A) scheme will offer tax deductions of 200% and benefits.
Worker training support and technology investments
With emerging disruptive technologies like ChatGPT, workers will receive support to upskill through the SkillsFuture Level-Up Programme. SMEs can fund employee training to obtain relevant expertise for their roles.
Finally, the Budget will provide funding support to SMEs for technology innovation and R&D initiatives. For example, it will top up the National Productivity Fund by SGD 3 billion. It will continue spending 1% of GDP annually on R&D as it has done for 20 years. Moreover, it will provide SGD 1 billion for R&D infrastructure development for public biosciences and medtech research and a new national semiconductor R&D fabrication facility.
The expectation is that the Singapore Budget 2025 will shore up the robust and diversified economy, equip workers, build sustainable cities, unite Singaporeans, and resolve other issues that arise. Sectors like eCommerce and fintech will continue growing in the coming years and will need further investment.
Overall, SMEs in Singapore must plan for the future and use government support and initiatives to defeat their competition in Southeast Asia. Furthermore, they must prioritise sustainability in their operations to conserve energy, create eco-friendly products, and protect the environment.