Commentary: The Singapore Budget and Heng Swee Keat’s shift away from Big Government
Under Heng Swee Keat, Singapore’s annual Budgets have shifted to give the business community more skin in the game of positioning the economy for the future, reflecting his collaborative approach in leading Singapore.
SINGAPORE: What will Finance Minister Heng Swee Keat’s leadership style look like as Prime Minister?
Since rumours he may take over the top job in the country swirled a few years back, many have been looking for signs of his cast of mind and how he would govern a Singapore facing complex challenges.
A longtime economic czar, with deep experience in the Monetary Authority of Singapore and the Trade and Industry Ministry before his move to politics, Mr Heng’s knack for collaboration has been evident in his strategy to grow the economy over the last few Budgets, including this year’s announced on Monday (Feb 18).
While most companies typically look for additional aid from the Government amid global business uncertainties in each Budget, Mr Heng focuses instead on giving the private sector more skin in the game in transforming the economy.
In Mr Heng’s track record since taking over the Finance Ministry in October 2015, a shift away from a top-down model of government to one that seeks to develop stronger partnerships to position Singapore for the future has been evident.
SKIN IN THE GAME OF COMPANIES’ GROWTH FOR THE BUSINESS COMMUNITY
Several initiatives were announced at Budget 2019, which aimed to give the larger business community a bigger stake in the growth of Singapore companies.
One example was the injection to the Co-Investment Programme (CIP), which has almost reached its goal of catalysing S$1.5 billion over 10 years to nurture Singapore-based globally competitive companies since its launch. Mr Heng said he will set aside another S$100 million.
It is not new, nor is the amount particularly large. And tax incentives and business grants, like the expanded SMEs Go Digital, still make up the mainstay of the more-than-S$1 billion government measures this fiscal year to help businesses build deep capabilities.
But the enhanced CIP builds on a concert of schemes rolled out in recent Budgets to catalyse private sector resources to help Singapore companies reach the next stage of their development, including the S$500 million of government support for the Aviation and Maritime Transformation Programmes, with matching investments from industry partners announced at Budget 2018.
Budget 2017 saw the launch of a S$600 million International Partnership Fund (IPF), which applies the principle of co-investment to help firms break into overseas markets.
At Budget 2016, Mr Heng introduced a Small and Medium-sized Enterprise (SME) Working Capital Loan scheme, to co-share half of the default risk with participating financial institutions to encourage lending to SMEs.
In this context, the enhanced CIP is a reaffirmation of the co-investment approach, which brings to bear the know-how and commercial discipline of the private sector to public sector programmes to support businesses, as one worth pursuing.
Notably, the CIP and previously announced IPF are managed by Heliconia, whose parent company Temasek’s strong reputation in taking smart investment bets will benefit backed companies, giving them a better chance of securing good investors.
This co-investment approach has so far reaped multiplier effects in nurturing a vibrant business environment. Singapore has seen over 220 venture capital deals of close to US$4.2 billion each year, a surge from the 80 worth US$136 million in 2012.
Other initiatives announced this Budget also reflect this preference for partnerships to encourage various actors to contribute to Singapore companies’ growth.
The freshly announced Innovation Agents Programme, which seeks to provide local firms access to experienced industry champions, gives the business community a larger part in their growth.
While trade associations and chambers (TACs) have long been recognised to play a leading role, this role has been strengthened after Mr Heng’s announcement that Enterprise Singapore will work on five-year roadmaps with TACs that have demonstrated strong leadership and shown ambition to do more for businesses.
SKIN IN THE GAME OF RESTRUCTURING FOR COMPANIES AND WORKERS
A second shift is the bigger stake the Budget has given to companies and workers in the economy.
Mr Heng spoke frankly on Monday to outline the sacrifices they must make and talked about restructuring, a word conspicuously missing last Budget.
Indeed, efforts over the past year to upskill workers and help companies develop capabilities have been positioned as “transformation”, shying away from restructuring - a word seemingly avoided for fear of causing uncertainty, when it implies growth will be slowed and jobs endangered.
But a forthright conversation about what is needed from companies and workers has been recently underway. PM Lee Hsien Loong just last month spoke of Singapore’s restructuring journey and highlighted that this march to achieve greater productivity and jobs growth must not let up.
Still, the Government will give stronger support for retraining, redesign and automation through enhancements to the Productivity Solutions Grant and Enterprise Development Grants, both rolled out at Budget 2018.
Detailed planning to undertake restructuring in recent years has in fact been underway over many years, taking the form of Industry Transformation Maps, the brainchild of Mr Heng, launched in Budget 2016 and applying a sector-specific approach to deepen partnerships between the Government and the industry to identify challenges and develop solutions.
That strategy was given muscle with a S$400 million Automation Support Package at Budget 2016, and a SMEs Go Digital Programme at Budget 2017, to help firms embark on automation projects and digitalise.
Workers too must own their pathway in this journey; schemes to help them take on new jobs in sectors with good growth prospects through the Adapt and Grow and Adapt and Train initiatives have been bolstered over the last few years, with a new Professional Conversation Programmes in blockchain, embedded software and prefab announced on Monday.
With these blocks in place, what the next phase of restructuring entails is for firms to undertake potentially difficult action needed to retune the economy for long-term growth.
Mr Heng’s Budget Speech was explicit on this point. He targetted an issue close to the hearts of many businesses – reliance on foreign labour.
For firms that have long lamented tight restrictions, Mr Heng has asked they bite a long-awaited bullet to address this unsustainable driver of growth.
So the foreign worker ratio for the services sector and S Pass ratio will be cut, even as the Government defers foreign worker levy raises in the fragile marine shipyard and process sectors where recovery has just begun – a deferment of four years now.
But the suite of initiatives have positioned companies and workers well to undertake this challenging restructuring task.
SKIN IN THE GAME OF INNOVATION FOR HIGHER INSTITUTES OF LEARNING
A third shift gives research partners a stronger role in enterprise development.
At Budget 2019, Mr Heng announced the creation of two Centres of Innovation in Aquaculture and Energy at Temasek Polytechnic and NTU respectively, and highlighted how closer collaboration between companies and institutes of higher learning is needed to marry “the spirit of entrepreneurship” with the rigour of research.
It might seem like a minor move but these centres are potentially backed by huge pots of money and a supporting ecosystem put in place over the years at past Budgets.
A total of S$19 billion in the Research, Innovation and Enterprise fund (RIE2020) had set aside by the Government to boost the generation of enterprise solutions by research institutes – a fund which Mr Heng topped up at Budget 2016.
New entities like SG-Innovate and agencies like A*STAR have been given bigger roles to help start-ups access talent in research institutes and aid companies to map out their operations and technology needs at Budget 2016 and Budget 2017 respectively.
A Jurong Innovation District was launched to house entrepreneurs, researchers and students testbedding new innovations at Budget 2016.
R&D can be a lifeline for companies to find innovative ways of doing old things, solve complex challenges and break into new sectors – giving them the edge in an age of disruption.
Local company Wavelength Opto-Electronic developed a patented, automated inspection system for contact lenses, reducing time taken by 10-fold, with aid from scientists at the Institute of Manufacturing Technology. Its revenue has jumped by almost 80 per cent last year.
SMRT is also partnering NTU to develop a new sensor system to detect MRT train door faults, with support from NRF, while NTU's and NUS’ collaboration with the private sector is fueling Singapore’s space dream with the development of locally-built satellites.
A STORY OF GROWTH, A NATIONAL CONVERSATION
All in all, if we focus on the Budget’s thrust of growing the economy, Mr Heng’s collaborative approach to rally others towards common goals, evident in his leading of Our Singapore Conversation years ago, comes through in his approach to boost growth through the Singapore Budget.
The signal Mr Heng has sent of the increasingly important role that companies, research centres and the larger business community will play over these years has set the tone for how the Government intends to work with the private sector in Singapore’s future economy.
He has placed Singapore businesses on a stronger footing and focused them on mustering support from other actors instead of relying on the Government for handouts.
Lin Suling is executive editor at Channel NewsAsia Digital News where she oversees the Commentary section.