The Covid-19 Inflection Point for SME’s | A Monumental Opportunity for Singaporean Entrepreneurs

The Singapore government can’t be blamed for this institutional inertia. It has been pushing companies to board the digital bus for years. The government has introduced various policies and grants, such as the Productivity and Innovation Credit Scheme (PIC), SME Go Digital, and the Productivity Solutions Grant (PSG). However, the bulk of SMEs have resisted modernising for various reasons, like costs and integration issues.

Launching off to the ISM event in Amsterdam

The current pandemic could be the watershed moment that sees small business owners finally make the jump online. The impact of Covid-19 on the Singaporean economy is already looking serious, with a 2.2% year-on-year contraction in the first quarter of the year ending December 2020 alone.

The Infocomm Media Development Authority of Singapore (IMDA) has worked with the Information Technology industry to provide remote working solutions for companies. The government has offered free trial periods of between 1-6 months for these digital solutions.

Now, with the need for digitisation greater than ever on account of the pandemic, the government is stepping up its efforts. Government agencies have stepped up their outreach efforts to SMEs, publishing pieces evangelising digitisation in leading dailies. In March, the Singaporean government increased its portion of funding for digital solutions under PSG from 70% to 80% of the costs until December 31, 2020. This means the companies only have to pay 20% of the cost to procure these solutions.

The scope of the grant has also expanded, covering tools for online collaboration as well as accounting, enterprise resource planning, and HR software.

For some companies, it might still be too little too late. But others that were already in the midst of digital transformation could emerge better positioned for opportunities both during and after the pandemic.

Policy push

Policy push

The most popular Singapore government policy in its digital push was the Productivity and Innovation Credit Scheme (PIC). Introduced by the Inland Revenue Authority of Singapore in 2010, it allowed companies to claim 400% tax deductions or a 60% cash payout for a variety of things, ranging from procuring IT or automation equipment to training employees and acquiring and licensing intellectual property rights.

While some companies were able to improve their productivity by procuring automated machinery and equipment under the scheme, loopholes in the programme led to widespread fraud. Companies misused the scheme by marking up prices of equipment to take advantage of grants, a food and beverage company owner told us, on condition of anonymity.

In 2016, more than S$5.8 billion (US$4.1 billion) was given out in tax savings, cash payouts and bonuses to over 143,000 companies under PIC. In 2017, more than S$332 million (US$234.1 million) was recovered in taxes and penalties from non-compliant taxpayers, including fraudulent PIC claims.

The scheme was finally phased out in 2018. In its place came an initiative specifically targeting SMEs—SME Go Digital. This sought to pre-approve solutions eligible for the Productivity Solutions Grant (PSG), which was also implemented in 2018. This sought to plug the holes in PIC, where companies were given more say in which solutions they procured.