Grow our Singapore Economy

This article was adapted from my speech at the Ministry of Trade and Industry’s Committee of Supply Debate 2024 on 1 March 2024.

Introduction

The past few years have been challenging. As a small and open economy, Singapore felt keenly the impact of uncertainties arising from the pandemic and structural shifts in the global economy. But we did not let this put us down. We pressed on with our transformation journey and helped our businesses turn challenges into opportunities.  

However, even before the pandemic was over, new challenges surfaced.

• Global food and energy prices rose sharply due to supply chain disruptions, which then led to global inflation;
• Interest rates were raised as central banks around the world sought to counter inflationary pressures;
• Geopolitical contestation and strategic competition between major powers intensified;
• Conflicts in Ukraine and the Middle East erupted; and
• There is growing urgency to address climate change.

Amidst these challenges, our economy grew 1.1% in 2023. For 2024, we expect our Gross Domestic Product to grow by 1% to 3%, and for inflation to moderate.

Near-Term Support for Business Transformation

Nonetheless, our external environment remains volatile and uncertain. Many businesses, especially small and medium-sized enterprises (SMEs), are concerned about increased business costs and access to financing. They have also asked for more support to pursue transformation and training to stay competitive and capture new opportunities.

To support our enterprises in addressing these near-term challenges, the Government is setting aside S$1.3 billion for the Enterprise Support Package, comprising three components:

1. Corporate Income Tax rebate to help with cashflow,
2. Adjustments to the Enterprise Financing Scheme to help businesses access loan financing, and
3. Extension of the SkillsFuture Enterprise Credit to support transformation and skills training efforts.

First, as part of the Corporate Income Tax Rebate, companies due for corporate income tax in 2024 will receive a 50% rebate, subject to a cap of S$40,000. To ensure that smaller companies, even those that pay little or no income tax, also benefit from the rebate, companies that employed at least one local employee in 2023 will receive a minimum cash payout of S$2,000.

Next, we will adjust the Enterprise Financing Scheme (EFS) that facilitates access to loan financing to better suit current business needs.

• To help companies sustain their internationalisation efforts while the global markets are recovering, we will extend the enhanced maximum loan quantum for the EFS-Trade Loan of S$10 million for one year till 31 March 2025, but at 50% risk-share.
• During the pandemic, we had expanded the EFS-Project Loan scheme to include domestic construction projects which were badly affected. Most construction projects are now back on schedule and the sector is generally recovering, although some companies are still facing challenges. Hence, we will extend support for domestic construction projects under EFS-Project Loan (Domestic) till 31 March 2025 to help the industry, at a lower maximum loan quantum of S$15 million.
• While business cashflow has improved since the pandemic, the working capital needs of SMEs have increased, amidst increased business costs. We will permanently increase the maximum loan quantum of the EFS-Working Capital Loan to S$500,000 to better support our SMEs.

Since 2020, more than 30,000 enterprises have utilised the SkillsFuture Enterprise Credit (SFEC) to support the training and upgrading of their employees and to pursue enterprise transformation.

To allow businesses to benefit more from the SFEC, we will extend the claims submission deadline by one year to 30 June 2025. We will continue refining our support for enterprises to deepen workforce and enterprise transformation.

Investing in the future

While we tackle near-term challenges, we must continue to invest in our longer-term future and build a resilient and vibrant economy for Singapore. To achieve this, we need to be gutsy. We will adopt four strategies, GUTC:

We will grow our economy through three thrusts:

1. Leveraging our trade networks;
2. Promoting investment and adoption of new technologies; and
3. Developing our talent

To sustain our economic growth, Singapore, as a small economy, cannot afford to turn away from the global market. Nor can we have the global market turn away from us.

1. Leveraging our trade networks

Singapore is well-placed to benefit from growth in our region and beyond. We have established a strong reputation as a well-connected, reliable, and trusted logistics and transportation hub. Amid shifts in global supply chains, businesses and investors continue to be attracted to Singapore due to our robust infrastructure, pro-business policies and skilled workforce. Foreign Direct Investment has grown by over 50 percent from S$1.9 trillion five years ago, to reach approximately S$2.9 trillion as at end-2023.¹ This trajectory is expected to continue.

To sustain our economic growth, Singapore, as a small economy, cannot afford to turn away from the global market. Nor can we have the global market turn away from us.

To ensure that Singapore remains competitive and attractive to global investors, we must expand international and regional connectivity by strengthening the rules-based trading architecture, widening our economic space and tapping on global opportunities.

We will continue to deepen cooperation and engagement with our global partners through platforms like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Indo-Pacific Economic Framework for Prosperity (IPEF); as well as via bilateral partnerships, like the US-Singapore Partnership for Growth and Innovation, China-Singapore Free Trade Agreement, and the India-Singapore Ministerial Roundtable.

Closer to home, the Southeast Asian region is projected to grow more quickly than the global economy over the next five years. Within ASEAN, trade in goods grew by about 30% from US$645 billion in 2018 to US$857 billion in 2022.² ASEAN as a grouping is also strengthening external relations with our partners. Under Indonesia’s Chairmanship last year, ASEAN concluded negotiations to upgrade the ASEAN-Australia-New Zealand FTA. We are currently negotiating an FTA with Canada, as well as upgrading and reviewing ASEAN’s Agreements with China and India.

Singapore has also stepped-up cooperation with our immediate neighbours. We are exploring the establishment of a Johor-Singapore Special Economic Zone to bolster our economic cooperation with Malaysia and Johor. We signed a Memorandum of Understanding in January this year and agreed to work towards improving cross-border flows in goods, people, and investments.

We will bolster our competitiveness in attracting and anchoring quality investments to create more opportunities and good jobs for Singaporeans. We will also help our companies ride the global wave of technological advancement and pursue opportunities in new growth areas.

2. Promoting investment and adoption of new technologies

How does Singapore intend to attract investments and support enterprises to capture future growth opportunities?

First, we will enhance our investment promotion toolkit by introducing a tax credit with a refundable cash feature called Refundable Investment Credit (RIC). The RIC will support qualified firms in developing high-value and substantive economic activities in Singapore, while bolstering our competitiveness in attracting and anchoring quality investments to create more opportunities and good jobs for Singaporeans.

Second, we will help companies ride the global wave of technological advancement and pursue opportunities in new growth areas. By being early movers and adopters, we can sharpen our companies’ competitive edge, capture the rapid growth of these new markets, and develop world-leading enterprises. For instance,

• Manufacturing is a key pillar of our economy. We will double down on our strengths in robotics and automation to target higher-value opportunities in advanced manufacturing, and secure new growth pathways. In the biomedical sciences sector for example, the nascent field of Precision Medicine has strong growth potential. We will identify and nurture promising local startups with the potential to develop cutting-edge solutions.

• The unprecedented growth of Artificial Intelligence (AI) will accelerate in the coming years. We must stay abreast of these developments. To drive AI adoption, we will partner 100 companies to build internal AI capabilities, develop and adopt AI solutions. We will also set up sectoral AI Centres of Excellence (CoEs) to address sector-wide use cases and build domain-specific capabilities. As a start, A*STAR - Agency for Science, Technology and Research will launch a manufacturing sector AI CoE by the end of this year.
• The transition to a low-carbon and sustainable economy will present new green growth opportunities. There are also opportunities to develop sustainable products, such as biofuels, sustainable aviation fuel and green chemicals, which support our green growth objectives.

Third, we will support enterprise collaborations and invest in our innovation ecosystem. To do so, we will enhance the Partnerships for Capability Transformation scheme (PACT), and expand it to more industries and modalities. We aim to facilitate 100 new PACT partnerships over the next five years. This will provide more opportunities for SMEs to level up their capabilities, enhance their competitiveness, and plug into global and regional value chains.

We will also invest in innovation efforts, including upstream research, translation, and commercialisation. Since its launch in 2016, the Startup SG Equity Scheme has catalysed over S$2.3 billion in private sector funding for over 230 Singapore-based startups. We are working on further enhancements to the Startup SG Equity Scheme and will announce details later this year.

3. Developing our talent

While we will need to continue tapping on global talent to complement our local workforce, we will redouble efforts to strengthen our local talent pool so that Singaporeans can benefit from Singapore’s growth. 

Amidst intensifying global competition for talent, we will have to ensure that our companies have access to a pipeline of Singaporean corporate leaders, in line with recommendations from Forward Singapore.

We will introduce a new initiative, the Global Business Leaders Programme (GBLP), to support key companies in sending their Singaporean middle to senior managers with leadership potential for overseas postings and other developmental opportunities. GBLP participants will be inducted as Singapore Leaders Network Fellows, where they will receive mentoring and grow their professional networks.

The GBLP will support companies in their regionalisation efforts and in growing a pipeline of Singaporean corporate leaders who can take their businesses to new heights.

Conclusion

The Government will provide near-term support to our enterprises via the Enterprise Support Package, to help them address immediate challenges. At the same time, we need to invest in our longer-term future and drive economic growth. We can achieve this by leveraging our trade networks, spearheading the adoption of new technologies, and developing our talent.

While there will be uncertainties and challenges in the future, if all of us work together as Team Singapore, we can remain relevant on the global stage and enhance our heft. We can seize new opportunities for growth, improve the lives of all Singaporeans, and build our shared economic future together.

Find out more about the support measures for businesses and workers, as well as the priority areas that Singapore will be working on in the Business Budget Booklet. 

Ministry of Trade and Industry (Singapore)

Singapore Economic Development Board (EDB)

Enterprise Singapore

Apeiron Bioenergy Engine Biosciences Neste Arkema GlobalFoundries

[1] Data Source: Singapore Department of Statistics (DOS), Feb 2024.

[2] Source: ASEAN Statistical Highlights 2023