Businesses have to take a leap of faith for the future

Written by Low Hwee Chua, Regional Managing Partner for Tax & Legal, Deloitte Singapore and Southeast Asia, and Ong Zhong Teck, Deloitte Singapore Tax Manager. The below are their personal views and may not represent the views of Deloitte.

As published in The Business Times on 17 February 2021.

We have been at war with Covid-19 for a year now, and it is not yet won. February 2020 saw the beginning of a global battle on many fronts, with aviation and tourism sectors the hardest hit. Looking ahead, nobody is able to predict for certain when this war against the pandemic will end. Many foresee it to be a long-drawn affair where more punches will be thrown, further affecting the economy and daily lives.

Singapore has done well so far in its fight, but the success that it has achieved should not be taken for granted. If Budget 2020 was consistent with the adage that 80 per cent of success is a matter of showing up, then Budget 2021 is a case of following through.

Last year, the Finance Minister committed a war chest of Covid-19 support measures amounting close to S$100 billion to cope with the economic impact. This was done over an unprecedented five Budget announcements.

Although Singapore's 2020 gross domestic product contracted by 5.4 per cent, these support measures had helped cushion the full force of the Covid-19 pandemic and averted a double-digit contraction for Singapore's economy.

However, such broad-based support measures are ephemeral and cannot be continued indefinitely.

Given the trend of running a balanced budget, and as this is the first Budget of the present government's new term, some analysts have predicted Budget 2021 to be a conservative budget. However, this is not the case.

Commitments for the future

Budget 2021 continues to be expansionary in view of the Covid-19 circumstances, but it is a case of a calibrated shift towards a targeted approach in extending existing schemes for those who still need help. Past reserves will also be tapped for a second consecutive financial year to fund these support schemes.

Nonetheless, it is expected that Singapore will be able to achieve a positive growth of 4 to 6 per cent in 2021 amid cautious optimism. A strong message to prepare for a post-Covid-19 world was brought across.

As emphasised during the speech, businesses will require long-term planning to thrive. The choices made and actions done now will impact generations to come.

The question one might ask is whether the level and extent of such "alphabet soup" of support schemes could be seen as enough to support businesses and workers in a post-Covid-19 environment.

The Jobs Support Scheme (JSS) was instrumental in retaining local employees during a period of economic uncertainty in 2020. The scheme, which provides wage support for up to 17 months, was scheduled to lapse after March 2021.

As expected, the JSS has been extended for another six months for those hard-hit sectors, such as aviation, aerospace and tourism, which continue to face significant headwinds as a result of Covid-19. The level of support for the JSS is tapered and will now range between 10 per cent and 30 per cent for the six-month extension.

Another scheme that was introduced last year was the Jobs Growth Incentive (JGI). The JGI is a wage subsidy scheme to assist employers to strengthen their local workforce over the period of September 2020 to February 2021.

Figures have been encouraging—over 110,000 local workers were hired in the first two months of the JGI scheme last year, with about half being mature local hires (aged 40 and over).

The JGI has been extended for another seven months till September 2021 with more support given to mature local hires, persons with disabilities and ex-offenders. For this group, the 50 per cent co-funding cap will be increased from S$5,000 to S$6,000 of gross monthly wages for up to 18 months, for wages from March 2021.

Innovation remains the core of Singapore's economic transformation. Collaboration is the key focus area with three key platforms introduced or enhanced—the Corporate Venture Launchpad, Open Innovation Platform and Global Innovation Alliance. These collaborative platforms serve to create a spark in the innovation ecosystem by bringing global industry players together.

A Singapore Green Plan 2030, or Green Plan, was launched in the weeks before Budget 2021. This is an ambitious but critical "whole-of-nation" movement and shows Singapore's commitment towards sustainability amid adversity. The Green Plan serves as a working roadmap to reshape Singapore post-Covid-19.

Budget 2021 provides tangible steps such as measures to reshape our transport footprint to adopt cleaner energy vehicles and discourage the use of internal combustion engine vehicles.

This transition could have a short-term cash-flow impact on businesses using commercial vehicles even with the support measures to ease the transition; painful but necessary.

Finally, subject to economic outlook, the government also signalled that the move to increase Goods and Services Tax (GST) will have to be made during 2022 to 2025, and as Mr Heng took pains to emphasise, it will happen "sooner rather than later", to ensure fiscal sustainability.

Bold action

Support measures would never be enough if they are to be viewed individually. Rather, these measures should be seen as a collective whole. With resources being finite, the calibration of quick fixes and long term needs is never easy.

There will, unfortunately, be casualties due to the scaling back of broad-based measures. Even so, the government has shown its willingness to intervene if the situation does not follow the expected trajectory.

Businesses must be willing to explore, grab new opportunities and pivot to new growth areas in a post-Covid-19, borderless and increasingly cyber world.

In spite of Covid-19, the digital economy continues to grow at a rapid pace, presenting immense power and reach for the taking.

Businesses should continue to harvest from it, and many other support measures apart from those mentioned, such as grants, remain available to help businesses harness the potential. The last thing any business should do is be inactive in a highly uncertain and dynamic business environment.

Businesses are better off taking the leap and trying, no matter how small the efforts might be, because fortune favours the bold.

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