Beyond Budget 2020: Businesses eagerly await more support
Local enterprises are looking forward to another round of government assistance to follow Budget 2020 as they deal with the impact of Covid-19
The relief measures for businesses announced in this year’s Budget was welcome news for many local businesses suffering from the impact of the Covid-19 outbreak. Yet, as the coronavirus continues to wreak havoc around the world – disrupting travel and supply chains – calls for additional government support has grown louder in recent weeks.
In his Budget speech on Feb 18, Deputy Prime Minister and Finance Minister Heng Swee Keat said that $4 billion would be set aside this year to support businesses and workers to cope with the downturn.
This would be used to fund measures such as a Jobs Support Scheme that subsidises the wages of local workers, a 25 per cent corporate income tax rebate for 2020, and rental rebates for landlords. Additional support was rolled out for the tourism, aviation, retail, food services and point-to-point transport services sectors, which have been hardest hit by coronoavirus spread.
Too little, too late?
Some operators in the beleaguered retail and F&B sectors fear that the measures may not be enough to save their businesses. Jacinta Ong, founder of tea products retailer TEA Ideas, had to close the company’s outlet – unfortunately located at the National Centre for Infectious Diseases (NCID) Building – for a month after Singapore raised the alert level to DORSCON Orange on February 3.
“As a micro enterprise, we are not getting any immediate help from this budget measures. Our business model is 80 per cent roadshows and events, which have all been cancelled during this period. The immediate help we need now is for cashflow help to tide us through,” she said. The company had applied for a working capital loan from a local bank, but was asked to provide a guarantor. “Who would want to be a guarantor at this time?”
Sandy Monteiro, founder of sandwich eatery Rebel Gurl, said that the 15 per cent property tax rebate granted to landlords in Budget 2020 may not be passed on to tenants. He said: “I fear that some landlords will work to best protect themselves and not the tenants.”
Recognising the issue, Trade and Industry Minister Chan Chun Sing on March 3 urged major landlords in Singapore to help retail tenants tide through the challenges of the COVID-19 outbreak.
Spreading to other sectors
Since Budget 2020, the fallout from the coronavirus has spread beyond the tourism, retail and travel sectors to impact manufacturers and other businesses as supplies are disrupted and consumer demand plunges. Kurt Wee, Chairman of SBF’s SME Committee, has been calling for support measures to be extended the rest of the local business community. “Other sectors are also starting to feel the impact of the economic slowdown,” said Mr Wee.
For instance, manufacturers and logistics players have been facing delays in receiving supplies from China. Hubei province, which is at the epicentre of the coronavirus outbreak, is one of China’s major manufacturing hubs. At a press conference in February, Enterprise Singapore chairman Peter Ong said that it has been “very difficult” to ship goods in and out of China.
Other sectors, from HR outsourcing firms to construction companies could also be impacted by supply chain disruptions, said Mr Wee. Meanwhile, construction companies will have also have to deal with a cut in their foreign worker supply announced in Budget 2020.
The government plans to cut the S Pass sub-Dependency Ratio Ceiling (DRC) of the construction, marine shipyard and process sectors from 20% to 15%. The cut will be implemented in two steps: from 20% to 18% on 1st January 2021, and subsequently to 15% on 1st January 2023.
The Singapore Contractors Association’s president Ng Yek Meng said that smaller construction companies would be especially hard hit by the curbs on foreign workers if the economy enters into a protracted slump. “Next year’s reduction (in foreign worker supply) will have a huge impact on us as more than half of the industry’s supervisory staff are S-pass holders,” said Mr Ng.
A second package in the works
Responding to the worsening economic situation, DPM Heng in March said that the government is putting together a second stimulus that will focus on supporting SMEs and workers; especially vulnerable groups like the self-employed and those who have been retrenched.
Mr Wee proposed that the government work with financial institutions to issue a six-month moratorium on principal repayments for business loans, to buy companies more time as the adjust their strategies to cope with the slowdown in the coming months. This arrangement would involve businesses having to pay only interest for six months.
Ms Ong called for lower employer CPF contributions, and deferment of tax payments, for micro enterprises such as TEA Ideas. “There is no point giving tax rebates to micro enterprises as we are in survival mode now, IRAS should consider deferring our repayment plan or even stretch it 18 months instead of current 10 months.”
Cutting down red tape
Mr Monteiro urged the government to reduce the time it takes for agencies to disburse funds from assistance schemes to more quickly ease the cashflow issues faced by businesses. “Cash flow is going to be critical. I hope that there will be direct SME support grants that don’t make us jump through hoops to get access, because by the time we get through the process, it might be too late,” he said.
To help firms caught in a cash-crunch, Mr Wee said any government assistance should ideally stretch for six months or longer. “Businesses are hoping for a bit more to help alleviate their cost and liquidity pressure; preferably a six-month long package to help businesses through this. Three months is quite a short period.”