SINGAPORE: Small- and medium-size enterprises (SMEs) will continue to receive help to cope with the COVID-19 pandemic as part of additional support measures expected to cost S$1.2 billion, Finance Minister Lawrence Wong announced in Parliament on Monday (Jul 5).
The support measures are meant for the period of “heightened alert” since mid-May, when restrictions were tightened as COVID-19 community cases rose.
Mr Wong said that on top of existing measures, two financing schemes will be extended for an additional six months from Oct 1 to Mar 31 - the Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme – Trade Loan.
The parameters for both schemes remain unchanged, including the government risk-share of 70 per cent. The Monetary Authority of Singapore will also extend the MAS Singapore Dollar Facility for Enterprise Singapore Loans, he said.
“During times of crises, we recognise that lower-income households and SMEs face bigger challenges. That is why we have designed our interventions to benefit them the most,” said Mr Wong.
“I encourage businesses to make use of this extension and other available schemes to ready themselves for the new normal. Many of our SMEs have already seized the opportunity to build new capabilities and future-proof their business.”
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In his ministerial statement, Mr Wong said the Government has been “careful to ensure a fair tax regime for all”, and SMEs had a low tax burden even before COVID-19.
“In fact, more than 50 per cent of such companies do not pay any corporate tax at all,” said Mr Wong.
He added that about 70 per cent of government grant disbursements to businesses went to SMEs from 2015 to 2019.
EXISTING SUPPORT MEASURES
Existing COVID-19 support measures are already providing help for SMEs, said Mr Wong. These include the Jobs Support Scheme (JSS) which subsidises local employees' salaries, tax rebates and loans.
Of the S$22 billion worth of loans to more than 25,000 companies through Enterprise Singapore’s financing schemes since the start of 2020, 99 per cent were to SMEs, said Mr Wong.
In addition, about two-thirds of the S$26.7 billion of JSS paid out to-date went to SMEs, along with about 90 per cent of the benefits from corporate tax rebates last year.
JSS, rental waivers and some other support measures were extended and enhanced for selected sectors through Phase 2 and Phase 3 (Heightened Alert).
For instance, from May 16 to Jul 11, Singapore provided 50 per cent of JSS support for businesses that had to suspend all or most of their operations like food & beverage outlets, gyms and the arts sector.
JSS support of 30 per cent was given to other sectors that were affected such as retailers, cinemas and other public entertainment businesses.
Rental waivers and cash payouts were also given to businesses and workers affected by the measures.
Singapore began easing restrictions from Jun 14, and authorities expect to open up further from Jul 12 to allow groups of five people to dine together.
As businesses reopen, JSS support will be tapered to 10 per cent for two weeks from Jul 12.
MEASURES TO COST S$1.2 BILLION
The S$1.2 billion for the additional support measures do not draw on Singapore’s past reserves, said Mr Wong as he tabled the Supplementary Supply Bill.
“Most parts of our economy continued to operate over the past two months. It was not the same as the circuit breaker last year where many activities were curtailed and literally the entire economy was shut down,” said Mr Wong.
“In fact, many individuals and businesses have learnt to adapt and pivot to new ways of working and doing business, allowing them to keep going in the face of tightened restrictions.”
There is also “a strong base of support measures” announced earlier this year in Budget 2021, he said.
These include the Jobs Growth Incentive and other measures in the SGUnited Jobs and Skills Package to help workers move to jobs in growing industries. Households and individuals also received help in the form of GST vouchers, CDC vouchers and the COVID-19 Recovery Grant.
Singapore’s economy is also recovering and the employment situation is steadily improving.
“Under these circumstances, I do not believe there is a need to draw on our past reserves,” said the Finance Minister.
“Let me be clear: We will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans," he added. “But we also need to be careful about the state of our public finances, and ensure they are sustainable for the future.”
FUNDS TO BE REALLOCATED
Instead, the Government will reallocate money from other areas of spending, Mr Wong said.
About S$600 million will come from the capitalisation of development expenditure under the Significant Infrastructure Government Loan Act (SINGA).
There are two projects which meet the criteria for financing under SINGA – the Deep Tunnel Sewerage System and the North-South Corridor. Funds were set aside for these two projects in Budget 2021, before SINGA was passed.
With SINGA, the Government will borrow for these projects and capitalise their development expenditure from the fourth quarter of 2021. The amount that was originally budgeted to finance the projects will instead be used to fund the Heightened Alert support measures.
“This is a one-off adjustment, as SINGA was passed after we started the financial year. Going forward, the amounts that will be capitalised under SINGA will be incorporated as part of future annual Budget estimates, and so we will not have such reallocation space in future,” said Mr Wong.
The remaining S$600 million will be reallocated from the underutilisation of development expenditure mainly due to delays in projects caused by the pandemic.
"It doesn’t mean we’re cancelling the projects, we still want to do the projects and we will have to catch up on our development schedules as the situation stabilises," said Mr Wong. "So the delayed expenditure will still need to be incurred in future financial years."
DRAW ON RESERVES NOT LIKELY TO BE PUT BACK “SOON, IF AT ALL”
The S$53.7 billion that Singapore expects to draw from its past reserves is not likely to be "put back anytime soon, if at all”, said Mr Wong.
Government expenditure in FY2020 was the highest in the country's history and led to its largest budget deficit.
The global economic outlook remains uncertain, the minister said. Although the US and European economies are recovering, there are many downside risks, including the threat of new waves of infections.
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However, barring unforeseen circumstances, Singapore’s GDP growth is expected to be at least 4 per cent to 6 per cent this year.
"As a small open economy, Singapore’s outlook depends crucially on these external developments. The uncertainty surrounding our economic outlook is therefore larger than usual," said Mr Wong.
For FY2021, Singapore's budget position remains expansionary, with an expected overall deficit of S$11 billion or 2.2 per cent of GDP, similar to what was announced at Budget 2021.