In the recent 2020 budget announcement, Minister Heng Swee Keat announced that the government would provide S $ 5.6 billion to help businesses and households mitigate the effects of the COVID-19 outbreak.
Against a backdrop of weak economic growth in Singapore of only 0.7% in 2019 – the weakest growth since the 2008 financial crisis – the country's economy is expected to decline by 0.5% to 1.5% this year ,
To help SMEs and businesses stay afloat, the government has set up a $ 4 billion stabilization and support package to help implement a wide range of measures.
These measures include an 8% cash grant for each employee's monthly salary for all companies in Singapore.
The government will also co-finance 20% of the 2019 wage increases and 15% of the 2020 wage increases to help Singaporean workers earn gross monthly income of up to S $ 5,000.
To make it easier for companies in Singapore to access working capital, the Working Capital Loan of the Enterprise Financing Scheme will double the maximum loan volume to S $ 600,000. The government will assume 80% of the loan risk, an increase from the current 50% to 80%.
While all of these measures theoretically help companies address some of the problems they may face, such as: B. Covering labor costs amid the slowdown in business (which improves cash flow for businesses), are they practical and sufficient for local businesses?
No major business changes
According to Shaun Tan, co-founder of the local retailer Dreamcore for custom gaming computers, these measures leave something to be desired.
While the employment promotion program helps cover some costs, it only applies to the fourth quarter of 2019 and has little impact on new hires in 2020.
It doesn't help to make important changes in the business.
Similar to the job support program, it is useful, but not strong enough for startups with a shortage of money to enable all earned employees to automatically raise wages because the focus is on the need for working capital.
I believe that both the Job Support Scheme and the Wage Credit Scheme might go one step further and consider the type (and) phase of the business to help companies at different stages of their life cycle for greater effectiveness.
– Shaun Tan, co-founder of Dreamcore, in an interview with Vulcan Post
In reality, implementing the idea proposed by Tan could be a big task since the government had to act quickly to implement a blanket measure that will help all companies in Singapore.
Photo credit: Wolf Burger
Ho Song-En, co-founder of the popular burger chain Wolf Burger, agrees on the minimal impact of the Support Scheme job.
The budget is helpful in the medium term, but it does not alleviate the immediate short-term pain that will still be felt. If I'm not mistaken, the taps won't flow until July, which is six months away.
– Ho Song-En, co-founder of Wolf Burger in an interview with Vulcan Post
A company with 20 employees and an average salary of S $ 3,600 has a monthly overhead of S $ 72,000.
As part of the Support Scheme job, the business owner receives a cash grant of S $ 5,760 per month or a total of S $ 17,280 for 3 months.
The cash subsidy then corresponds to covering the costs of 1.6 employees for a total of 3 months.
Table source: IRAS
With companies declining between 10% and 30%, the cash grant is barely enough to cushion the impact of the business slowdown.
Some government measures that are welcomed
For Ho, who works in the F&B area, he welcomes the good news about property tax rebates.
As part of the budget announcement, qualified commercial real estate is granted a 15% property tax reduction to help the retail and food services sectors.
"Hopefully the landlords are fair enough to pass the full property tax rebates on to the tenants," said Ho.
Tan and Ho commented on the corporate finance system and said that it is a great advantage for startups who need cash for their working capital needs at a low interest rate.
While the budget gives Singapore business owners a little respite, both Shaun and Ho realized that it might not be enough to make a real impact on their respective companies.
Other sectors do not need government support either
Understandably, the government may find it impossible to provide more support as the COVID-19 situation is still developing dynamically. We don't even know how long this virus outbreak will last.
Still, it may be unwise for the government to exhaust the entire budget now.
Regardless, there are many other notable sectors that are slowing down. For example, construction companies that suffer from supply chain disruptions and event companies that have had to endure booking cancellations.
Aside from the five industries identified (tourism, aviation, retail, F&B, and transportation), the government needs to be aware that many more sectors are affected and need help and support.
Selected image source: Bloomberg