The Government is expected to spend S$1.2 billion to provide support packages for small-and medium-size enterprises (SMEs) to cope with the COVID-19 pandemic, said Finance Minister Lawrence Wong on Monday (5 July) in a ministerial statement on how the measures will be funded.
While delivering his speech in Parliament, Mr Wong said that the support measures are for the period of “heightened alert” since mid-May, where tight restrictions were in place to contain the spread of the deadly coronavirus within the community.
In addition to the existing measures, Mr Wong pointed out that two financing schemes will be extended for an additional six months from 1 October to 31 March 2022 – the Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme – Trade Loan.
He also said that the parameters for both schemes did not change, including the government risk-share of 70 per cent. The Monetary Authority of Singapore will also extend the MAS Singapore Dollar Facility for Enterprise Singapore Loans, he said.
“During times of crises, we recognise that lower-income households and SMEs face bigger challenges. That is why we have designed our interventions to benefit them the most,” said Mr Wong.
“I encourage businesses to make use of this extension and other available schemes to ready themselves for the new normal. Many of our SMEs have already seized the opportunity to build new capabilities and future-proof their business.”
Singapore entered Phase Two (Heightened Alert) on 16 May to contain the spread of the deadly coronavirus within the community after clusters like Tan Tock Seng Hospital and Changi Airport emerged and the number of unlinked community cases increased.
However, the restrictions were relaxed from 14 June as the country moved into Phase Three (Heightened Alert).
In his speech, Mr Wong also said that the Government has been “careful to ensure a fair tax regime for all”, and SMEs are subjected to a low tax burden even before COVID-19.
“In fact, more than 50 per cent of such companies do not pay any corporate tax at all,” said Mr Wong.
He added that about 70 per cent of government grant disbursements to businesses went to SMEs from 2015 to 2019.
JSS among current support measures in place
Mr Wong also said that existing measures such as the Jobs Support Scheme (JSS) are already there to help SMEs.
JSS helps by subsiding local employees’ salaries, tax rebates and loans. Mr Wong noted that about two-thirds of the S$26.7 billion of JSS paid so far went to SMEs, in addition to about 90 per cent of the benefits from corporate tax rebates last year.
Under JSS, sectors like F&B outlets, gyms, fitness studios, performing arts organisations, and arts education centres received JSS support of 50 per cent.
On the other hand, businesses that did not have to suspend operations but were still affected such as retail outlets, cinemas, and indoor playgrounds, received a 30 per cent subsidy.
However, as Singapore prepares to reopen its economy further, JSS support will recede to 10 per cent for two weeks from 12 July.
S$1.2 billion not taken from Singapore’s past reserves
Mr Wong also clarified that the S$1.2 billion for the additional support measures will not be drawn from Singapore’s past reserves.
“Most parts of our economy continued to operate over the past two months. It was not the same as the circuit breaker last year where many activities were curtailed and literally the entire economy was shut down,” said Mr Wong.
“In fact, many individuals and businesses have learnt to adapt and pivot to new ways of working and doing business, allowing them to keep going in the face of tightened restrictions.”
He also said that there is also “a strong base of support measures” announced earlier this year in Budget 2021.
Mr Wong asserted that Singapore’s economy is also recovering and the employment situation is steadily improving.
“Under these circumstances, I do not believe there is a need to draw on our past reserves,” said the Finance Minister.
The Government, he said, “will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans”.
“But we also need to be careful about the state of our public finances, and ensure they are sustainable for the future.”
Instead of drawing from past reserves, the Government will relocate money from other areas of spending.
For instance, about S$600 million will come from the capitalisation of development expenditure under the Significant Infrastructure Government Loan Act (SINGA).
Under SINGA, there are two projects which meet the criteria for financing, which are the Deep Tunnel Sewerage System and the North-South Corridors. Funds were allocated for these two projects in Budget 2021, before SINGA was passed.
With SINGA, the Government will borrow for these projects and capitalise their development expenditure from the last quarter of this year. The original sum that was allocated to finance the projects will instead be sued to fund the Heightened Alert support measures.
“This is a one-off adjustment, as SINGA was passed after we started the financial year. Going forward, the amounts that will be capitalised under SINGA will be incorporated as part of future annual Budget estimates, and so we will not have such reallocation space in future,” said Mr Wong.
As for the remaining S$600 million, it will be reallocated from the underutilisation of development expenditure primarily due to delays in projects caused by the pandemic.
“It doesn’t mean we’re cancelling the projects, we still want to do the projects and we will have to catch up on our development schedules as the situation stabilises,” said Mr Wong. “So the delayed expenditure will still need to be incurred in future financial years.”