The Singapore Budget 2023, under the theme “Moving forward in a new era”, unveiled several initiatives geared towards enhancing the economy, improving the skills and expertise of the workforce, reinforcing social cohesion, and fortifying the nation’s resilience. This year’s tech-related efforts are designed to promote innovation in various industries, as opposed to last year’s budget statement that emphasised digitisation and optimisation of operations.
The Singaporean government has been actively allocating resources towards research and development, acknowledging its importance in propelling the nation’s growth. As such, the government has committed a total investment of SG$25 billion from 2021 to 2025 to encourage research, innovation, and enterprise. The government is also pursuing industry transformation maps to restructure and elevate the nation’s industries one by one.
As a result of these efforts, Singapore has seen notable progress in innovation, but it is not without risks that businesses may struggle to undertake, particularly amid slower growth and higher costs.
To stimulate innovation in Singapore, the government is introducing a new Enterprise Innovation Scheme and enhancing tax deductions for five key areas, including Research and Development carried out in Singapore, Registration of intellectual property, Acquisition and licensing of intellectual property rights for taxpayers with less than SG$500 million in revenue, Innovation with polytechnics and Institute of Technical Education (ITE), and Training via courses approved by Skillsfuture Singapore and aligned to the Skills Framework.
The tax deductions for these activities will increase from 250% to 400%, with a qualifying expenditure cap of SG$400,000 for each activity, except for Innovation with polytechnics and ITE, which has a cap of SG$50,000. This move is expected to result in tax savings of nearly 70% of the investment made.
In addition, to maintain its attractiveness to multinational enterprises and facilitate high-quality investments, Singapore will inject SG$4 billion into the National Productivity Fund, which is currently used to boost productivity for local businesses and citizens, including reskilling and worker training.
Notably, the Singapore Budget 2023 revealed that the NPF’s coverage will now encompass investment promotion, with a focus on providing support to companies to enhance their capabilities, augment domestic ecosystems, and upskill their workforce.
According to the Budget Statement, based on the current global economic conditions, the government anticipates a positive but slower growth rate for Singapore of 0.5% to 2.5% this year.
Despite the projection of slower growth, Singapore’s economic fundamentals remain strong. Singapore’s handling of the pandemic over the past three years has enhanced its reputation as a reliable and trusted node in global supply chains.
Singapore’s deep relationships with both the US and China, as well as partners in ASEAN and the wider region, make it a neutral and increasingly important place for global and regional businesses. Singapore intends to take full advantage of these opportunities to attract new flows of investments, capital, talent, and ideas, all of which will add vibrancy to its economy and create more job opportunities for Singaporeans.
The Singaporean government’s focus on innovation is expected to be a key driver of the nation’s economic growth in the coming years. By encouraging businesses to innovate, Singapore is positioning itself as a leader in technology and knowledge-driven industries, which are likely to be key drivers of growth in the future. Additionally, the promotion of research and development in Singapore will lead to a more highly skilled workforce and support the country’s transformation into a knowledge-based economy.
