How to reframe Singapore’s investment promotion strategies

Sustaining a vibrant business ecosystem

With the potential dampening impact of BEPS on FDIs, the key to unlock the next phase of growth for Singapore will be to drive a vibrant industry ecosystem. Catalyzing close partnerships between foreign investors and large MNEs with local SMEs such that all parties co-create levers of growth and value together will also be critical.

SMEs represent a significant part of the Singapore economy, making up 99% of all enterprises locally. Supporting local SMEs and ensuring that they are an equally strong pillar of the economy (in addition to being a complement to the global MNEs in Singapore) has long been an objective of the government. Leading SMEs have demonstrated exciting growth potential, judging from how some of Singapore’s homegrown brands have expanded and become regional and global companies. Having said that, more can be done for more SMEs to grow and flourish if the country were to build a truly vibrant and diverse business ecosystem.

Several measures in Budget 2023 are helpful. A S$4 billion top-up was made to the National Productivity Fund, with the objective of anchoring more quality investments in Singapore and supporting companies to develop new capabilities, add greater value to domestic ecosystems and upskill workers.

To encourage businesses to engage in R&D, innovation and capability development activities, the new Enterprise Innovation Scheme grants a super deduction of 400% for the first S$400,000 of qualifying expenses incurred on certain activities. These include R&D conducted in Singapore, innovation collaboration projects with polytechnics and institutes of technical education, registration and acquisition of intellectual property rights, and training activities. This generous level of benefits, designed purposefully to disproportionately benefit SMEs, will help ensure that the existing momentum to transform, build innovation capabilities and upskill employees continues to accelerate.

The government also doubled down on its efforts to develop local champions by enhancing existing schemes, such as Scale-Up X and other bespoke support for SMEs. Indeed, support for SMEs will need to move from a scheme-centric approach to an enterprise-centric one that caters to companies’ needs and challenges, as the government had readily acknowledged.

Investing in a skilled workforce

For investors, having a strong pool of skilled talent that can support the growth and operations of their companies is an important factor. With technology advancements and other forms of disruption, jobs and roles have shifted radically over the last few years. Today, the need for upskilling and capability development has never been more acute, as enterprises look to build a future-ready workforce and adapt jobs accordingly.

This focus on upskilling and re-skilling is not new in Singapore, starting with the Continuing Education and Training Masterplan in 2008 and then the launch of the SkillsFuture movement in 2015. Notable strides have been made, yet gaps in the nation’s talent pool continue to exist.

Given tight labor markets globally, the ability to quickly match job vacancies to available skill sets and identify and close gaps in skills that are in demand is critical in lubricating the job market and reducing search times. The introduction of the Jobs-Skills Integrator (JSI) recognizes this urgency, with the government envisioning a more robust training and placement ecosystem for the benefit of enterprises and workers. For the JSI initiative to be effective, a relentless push for watertight collaboration within the ecosystem of stakeholders will be key. Solving the issues with the job-skills nexus to facilitate the availability of a skilled workforce to support enterprise growth will create an attractive talent proposition that is not easily replicable.