SINGAPORE - From giving incentives to draw global businesses and investors here, to improving the skills of the workforce, observers say this year’s Budget continues to make Singapore’s competitiveness a priority, but suggested tweaks to expand its reach.

Some analysts proposed more features to be added to the Refundable Investment Credit (RIC) scheme, while others cautioned against exacerbating economic disparities as the country moves towards high-tech ventures.

Mr Tan Tay Lek, PwC Singapore’s corporate tax partner, said the introduction of the RIC scheme demonstrates Singapore’s resolve, particularly as it comes in the face of international tax changes that are beyond the Government’s control.

Under the RIC, companies that carry out work in areas such as green transition and research and development can get up to 50 per cent of support on expenditures like manpower costs and freight and logistics costs.

Mr Tan suggested that the Government can enhance the RIC scheme by making it available to businesses that are not as expenditure-heavy, such as tech solutions, but also bring economic activities to Singapore.

“For instance, if a firm achieves sales or revenue growth in Asia because of the investments in headcount, training, R&D in Singapore, the Government can give it the RIC,” he said.

Ms Yvaine Gan, the global investment and innovation incentives leader at Deloitte Singapore, said the Government can look at having output-based features.

By this, she means that the RIC can include output or volume-based features, so the credits can be awarded based on a manufacturing company’s volume of products made or a trading company’s volume of trades that flowed through Singapore, which would then secure high-value activities here.

Associate Professor Simon Poh of the National University of Singapore (NUS) Business School’s accounting department said the RIC plan will play a very important role as it acts like a grant that global firms can use to offset against the corporate tax they pay, without violating a global initiative.

The initiative, to kick in here in 2025, aims to ensure a global minimum effective tax rate of 15 per cent for large multinational enterprises (MNEs).

Observers said investments to be made by Singapore, including $1 billion in artificial intelligence (AI), an additional contribution of $3 billion into the Research, Innovation and Enterprise 2025 plan, as well as the topping up of $2 billion to the National Productivity Fund, will pave the way for the Republic to move towards these areas and remain relevant in the world.

SGTech chair Wong Wai Meng welcomed the funding, saying it would help position Singapore as a test bed for innovations and attract investments from companies to set up R&D hubs and innovation centres of excellence here.

However, he warned that it is vital to ensure the benefits of these investments trickle down to all stakeholders, particularly small and medium-sized enterprises (SMEs).

Mr Wong suggested that a portion of the $1 billion designated for AI initiatives should be directed towards SMEs.

“Neglecting to do so could exacerbate economic disparities, with multinational corporations thriving while local SMEs struggle to keep up with technological advancements. It’s imperative to ensure that the opportunities and possibilities generated by these investments are accessible to all, thus avoiding the creation of a digital divide,” he said.

Mr Yoon Young Kim, cluster president for Singapore and Brunei at Schneider Electric, said investors are likely to be attracted to a business ecosystem that encourages collaborations.

So beefing up the Partnerships for Capability Transformation (Pact) scheme will promote strategic partnerships between larger companies and SMEs, he said.

Mr Kim added: “MNEs offer vital resources like market access, technology, expertise and financial support, addressing gaps often faced by SMEs. Conversely, SMEs contribute local insights, agility and creativity, augmenting MNEs’ capabilities.”

Mr Cheah Wai Kit, senior director of Asia-Pacific products and practices at Lumen Technologies, said the push for firms to adopt new technologies like AI will leave many businesses struggling due to their legacy IT systems and infrastructure.

This is where the Government’s move to upgrade the Nationwide Broadband Network is welcome, he said.

Mr Lai Kee Yin, director of technology and digital consulting at Mazars in Singapore, noted that while significant strides were outlined in the recent Budget, a potential area that could be refined is the integration and synergy between the initiatives and broader industry needs.

He said it is key to ensure that the development of AI technologies and the broadband infrastructure upgrade are closely aligned with the evolving needs of businesses, educators and healthcare providers. “Additionally, fostering a culture of collaboration between the public sector, private enterprises and educational institutions can further enhance the effectiveness of these measures.”

Funding and infrastructure aside, the reskilling and retraining measures announced in the Budget speech are also noteworthy.

PwC’s Mr Tan thinks a highly skilled and reliable workforce can be valuable in drawing investors to set up shop in Singapore.

Instead of setting the age threshold for the SkillsFuture Level-Up Programme at 40, he said the Government could consider lowering it to 35 “as it can take many months of retraining or reschooling and years more of learning on the job before the worker becomes effective in his or her new role”.

Prof Poh said Singapore’s Budgets have always looked at ways to attract foreign direct investments.

He added that the Republic’s tax regime is already very competitive, so it must compete on non-tax measures.

While operating costs are high due to higher rentals, Prof Poh said the Republic still has a lot going for it, including a pro-business environment and respect for the rule of law.

He added that when global firms and investors do business here, they will create jobs for locals, and the expats who come with the businesses will contribute to Singapore taxes and their consumption will benefit other businesses.