Klareco Insights – Budget 2019
Singapore’ Budget: popular and far-sighted
By: Graham Stewart and Lu Ching Lau
- Finance Minister Heng’s 2019 Budget focussed on helping SMEs take advantage of the Fourth Industrial Revolution rather than fall victim to it
- Very clear boosts for cybersecurity, AI, robotics, and automation innovators
- But faith in algorithms was not the only outcome – incentives to upskill demonstrated commitment to the innate adaptability of human intelligence too
- Heng balance identifying where investment can enhance Singapore’s areas of advantage with fiscal prudence – Singapore’s finances are still in good shape
This was a politically astute budget. A Finance Minister as committed to (almost) balancing the government’s books as Heng Swee Keat knows well the pleasure of receiving in proportion to giving. Yet, with instant reaction understandably focussing on the SGD 6.1 billion of healthcare assistance assigned to the Merdeka generation, and the SGD 1.1 billion Bicentennial Bonus, this budget has already been cloaked in the warm after-glow that comes with recognising those who have built this nation yet still require protection themselves.
In time, traders and their customers may spot the effects of a GST rise, but for the most part this budget managed the act of levitation which so few finance ministers around the world can sustain – appearing to help the vulnerable without hindering the wealth-creators. Time and again Mr Heng spoke of what government could do for business, not what business could do for government.
The sectors that may seize the greatest opportunity from the Finance Minister’s focus are:
Defence contractors and the highly-specialised tech companies whose software development is both a driver of and spin off from the Singapore government’s dual focus on security and smart technology.
Cybersecurity and algorithm technology can expect to benefit from the defence and security focus and, more broadly, from the Government’s expansion of its Go Digital programme to subsidise up to 70% of SMEs’ investment in cyber-security and AI. Taken together with the widening rollout of Industry Digital Plans beyond retail and logistics to construction and accountancy, this creates enormous potential for tech companies to reach Singapore’s more than 200,000 SMEs very much sooner than if they were left entirely to their own devices to determine the swift and the smart.
In turn, high-growth companies can continue their scale-up momentum by partnering with Enterprise Singapore (ESG) to access experience, identify the opportunities for growth and expand overseas. Taken together with the extension of loan access for automation and the additional SGD 100 million committed to the SME-assisting Co-Investment Fund III, this was very much a budget for SMEs and, by extension, the two-thirds of the Singaporean workforce that they employ.
The extent of the Budget’s backing for Digital transformation and the Fourth Industrial Revolution (4IR) will be felt not just by the diverse array of innovative companies from robotics to biotech and the internet of things, but by a far wider constituency including 4IR-focussed consultancies that help their clients identify the most fertile areas of opportunity and connection.
Ultimately the health of the economy is dependent upon the adaptability of its citizens. That this budget’s relatively modest reduction in reliance on foreign talent can be compensated by investment in ongoing up-skilling of Singaporeans seems like quite a safe bet. Particularly noteworthy was the boost to re-skilling through new Professional Conversion Programmes to cover blockchain and embedded-software. One consequence of this may be to ensure these disruptors can draw on a wider range of experience and broader breadth of comprehension.
One connection that this Budget especially recognised was the inter-relationship between Singapore’s attractiveness to tech innovation and scientific investment and the universities and research bodies that create the constellation of knowledge in a small island. Government investment in centres of innovation recognises the accelerator effects of creating research clusters to attract talent to cross-pollinate ideas. This budget’s focus was in encouraging the exploration of aquaculture(enhancing marine life sustainability) and energy efficiency in Singapore’s research institutions. But it is part of a wider vision for the ‘smart nation’ that will yield very considerable benefits for the country’s status as an incubator in driving advances, not least in biotech, pharma and medical research. Long-term this may have even greater benefits than deepening healthcare access for the Merdeka generation (important though that is), from the war on diabetes to the treatment of cancer.
The true worth of a budget is rarely captured in the immediate reception it receives, and those that are the most popular at the time are not always those that hindsight admires so highly. Yet, in its foresighted investment in the sectors where Singapore is already developing its cutting edge without seriously unbalancing the nation’s finances, this budget looks to a future of enhanced opportunity. At a time when many of the world’s finance ministers can promise future generations little but unfunded debt obligations, Mr Heng cannot be faulted for intent.