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Singapore Budget 2021 – Emerging Stronger Together

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Deputy Prime Minister Heng Swee Keat delivered the 2021 Budget on Tuesday 16 February 2021. The Singapore Budget is prepared for each financial year, which begins on 1 April and ends on 31 March the following year. Every Budget builds on the foundations laid by earlier Budgets, charting a long term strategic financial plan for Singapore, and the budget 2021 makes no exception.
The “Emerging Stronger Together” budget unveiled measures to strengthen the backbone of Singapore’s ecosystem and provide ammunition to overcome the difficult situation propelled by the COVID-19 pandemic.
Last year, the Singapore Government committed nearly $100 billion through five Budgets to support Singaporeans, help tide businesses over this difficult period, and most importantly, keep the population safe.
Singapore faced the worst recession since our independence.

  • The pandemic-triggered recession has hit both demand and supply simultaneously.
  • Singapore’s GDP contracted by 5.4% in 2020.
  • The overall budget deficit for Financial Year 2020 is also the largest since Singapore’s independence, at $64.9 billion, or 13.9% of GDP.

Despite the situation, the Ministry of Finance recently released an interim assessment of the COVID-19 Budget measures. The combination of fiscal, monetary, and transitional measures, mounted as a whole-of-government response, has helped avoid a worse recession, avert job losses, and mitigate inequality.
The goal of the budget 2021 is to build a stronger Singapore:

  • That is economically vibrant, so to create good jobs for Singaporeans and foreigners and opportunities for businesses;
  •  That is socially cohesive, with a strong social compact and community spirit;
  • That is a welcoming home, green and sustainable for generations to come; and
  • That has the fiscal and social reserves to enable continued stability and progress.

    COVID-19 Resilience Package in Singapore

The Ministry of Finance has announced that Singapore has set aside $11 billion for a COVID-19 Resilience Package. This Package will have three prongs:

  1.  First, to address the immediate needs to safeguard public health and re-open safely;
  2.  Second, to support workers and businesses where needed; and
  3. Third, to target support for sectors that are still under stress.

The second and most business-related prong of the Package is to continue support for workers and businesses where needed. So far, Singapore has committed over $25 billion to the Jobs Support Scheme (JSS) – introduced in the 2020 Budget – and supported over 150,000 employers for up to 17 months.

In the recently announced Budge, the MoF has committed to continue to provide the JSS targeted towards sectors that continue to be hard hit. The JSS will be therefore extended for firms in Tier 1 and 2 sectors by up to six months, covering wages paid up to September 2021. This will provide continued support for businesses and workers in sectors that continue to be hard-hit amidst the protracted economic downturn:

  • For firms in Tier 1 sectors – aviation, aerospace, and tourism. Firms in these sectors will receive 30% support for wages paid from April to June 2021, and 10% support for wages paid from July to September 2021.
  • For firms in Tier 2 sectors, such as retail, arts and culture, food services, and built environment, that are currently receiving 30% JSS support, will receive 10% for three months, covering wages paid up from April to June 2021.
  • For firms in Tier 3A sectors, JSS will continue covering wages up to March 2021, as previously announced. Overall, businesses in these sectors are generally recovering.

    The third prong of the COVID-19 Resilience Package is to provide more targeted support for the worst-hit sectors, which continue to be adversely affected in 2021. They will need help to maintain capabilities and eventually recover. The Government has forecasted a cost of $ 870 million to support the aviation sector and $133 million for the land transport sector.

Support to innovation

In the newly released budget it was confirmed that Singapore will enhance several packages to support capability development and sector transformation, to encourage the community to deepen skills, go digital, and transform business models.
One of the main pillars of the new budget is to grow a vibrant business community, with a strong spirit of innovation and enterprise, deeply connected with the ASEAN region.
To support Singapore businesses to innovate and grow, the Government will invest in three key platforms.

  1. The first platform is the Corporate Venture Launchpad, which will be piloted this year to drive new innovative ventures. This Launchpad will provide co-funding for corporates to build new ventures through pre-qualified venture studios.
  2. The second platform is the Open Innovation Platform, or OIP. The OIP facilitates the matching of problems faced by companies and public agencies, with solution providers, and co-funds prototyping and deployment.
  3. The third platform enhanced is the Global Innovation Alliance, or GIA.

The GIA serves to catalyse cross-border collaboration between Singapore and major innovation hubs globally. The GIA network currently has 15 city links, including four Southeast Asian cities – Bangkok, Ho Chi Minh City, Jakarta, and Manila. I will expand it to more than 25 cities around the globe over the next five years.

Among the many measures introduced by the Budget 2021, particularly interesting is the new Emerging Technology Programme. This will encourage more mature enterprises, from micro and small, to medium and large enterprises, to invest in new and emerging technologies to sharpen their competitiveness.
The new Emerging Technology Programme will co-fund the costs of trials and adoption of frontier technologies like 5G, artificial intelligence and trust technologies. This will support commercialisation of innovations and diffusion of technology downstream.

Human Capital

As the employment landscape is undergoing fundamental changes, the Singapore government has launched several initiatives, the most important being the Jobs Growth Incentive and the Wage Credit Scheme.
The Jobs Growth Incentive (or JGI) supports employers to accelerate their hiring of local workers between September 2020 to September 2021 (inclusive), to create good, long-term jobs for locals. If the Qualifying Criteria for the Firms are met - employers must have an overall increase in local headcount and increase in locals earning of at least $1,400 per month, compared to their local workforce in the baseline month – for non-mature local hires there is an incentive 25% on first $5,000 of gross monthly wages for up to 12 months.
The current budget has extended the Wage Credit Scheme (WCS) introduced the first time in Budget 2013 and already extended in the Budgets 2015, 2018, 2019, 2020. In Budget 2020, the government co-funding ratios for wage increases in 2019 and 2020 was further raised from the current 15% and 10%, to 20% and 15% respectively. The qualifying gross wage ceiling was also raised from $4,000 to $5,000 for both years.
In the Budget 2021, the Scheme has been further extended by one year to 2021, with the government co-funding ratio remaining at 15% and the qualifying gross wage ceiling at $5,000. Gross monthly wage increases (at least $50) previously given in 2019 and 2020 by the same employer will continue to be co-funded if they are sustained in 2020 and 2021.
Lastly, the budget 2021 has introduced the provision to reduce the Manufacturing S Pass Sub-Dependency Ratio Ceiling, or sub-DRC, in two steps, to 18% from 1 January 2022, and to 15% from 1 January 2023.

Singapore Green Plan 2030

 

The last section of the budget is focused on the Singapore Green Plan 2030.
This is an ambitious long-term plan that builds on ongoing efforts, to secure a green, liveable, and sustainable home for generations of Singaporeans to come. The main measures introduced are:

  • To continue supporting technology adoption in the agri-food sector, the MoF has set aside $60 million for a new Agri-Food Cluster Transformation Fund.
  • To catalyse partnership between the public and private sectors, the Singapore government will fund $30 million over the next five years for EV-related initiatives.
  • The Government will take the lead by issuing green bonds on select public infrastructure projects.

    Fidinam Singapore

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