Outlook for Singapore economy and industries

Compared to the previous quarter, more companies were positive about Singapore’s current economic situation. 1 in 2 companies anticipated that the economy and ICT industry will be better in a year’s time – this sentiment is similar to the previous quarter.

This quarter saw ‘Poor’ ratings of the economy at an all-time low for ICT companies. Similarly, sentiment on the ICT industry seems to be stabilising, with nearly 2 in 5 companies rating the current ICT industry situation as ‘Good’.

We noted in our summary findings for FY20 Q2, that some ICT business leaders were cautious not to be overconfident. This was because some had expected a fallout when various government grants, subsidies and other support tapered off. This worry appears unfounded. The Singapore Government seem to be doing well in calibrating the support for various businesses, as announced in Budget 2021. In further positive news, the Ministry of Trade and Industry of Singapore also forecasted that Singapore’s GDP is expected to grow 4 to 6 percent in 2021.

Our survey corroborates the business optimism index by the Singapore Commercial Credit Bureau (SCCB). SCCB’s survey saw a slight uptick in business confidence among Singapore firms for the first quarter of 2021 but it remained in the contractionary zone. While the improving business sentiments bodes well for Singapore, we note what SCCB chief executive Audrey Chia said: “While there is a slight upturn in business sentiments for the first quarter of 2021, the overall economy is not entirely out of the woods yet.”

Impact of COVID-19 on businesses

53 percent of ICT companies reported that they were profitable in FY2020.

Fewer ICT companies reported a Year-on-Year (Y-o-Y) decrease in revenue in October – December 2020 compared to July – September 2020. With the Singapore economy anticipating a gradual recovery, positive revenue trends are forecasted to continue, with 3 in 10 companies expecting Y-o-Y revenue growth in January – March 2021.

Furthermore, 34 percent of ICT companies expected a Quarter-on-Quarter revenue growth in January to March 2021 as compared to October to December 2020. This trend is consistent with our previous findings in FY20 Q3.

Manpower changes

In October – December 2020, 3 in 10 ICT companies created at least 1 position in their organisation.

The proportion of ICT companies that reported job redundancies (9 percent) was also the lowest across FY2020. In addition, 39 percent of ICT companies were planning to create new positions in January to March 2021.

Tech-heavy jobs remained the focus among the new jobs created in the last quarter (October to December 2020).

Business strategies for first half of 2021

It is observed that there is a shift in the business strategies. In the previous quarter, the top strategies ICT companies were focused on digitalisation, training, and R&D. While digitalisation and innovation remain important, we saw other strategies taking the top two spots.

Almost 2 in 5 companies are planning to increase their business expansion budgets to venture into new markets and start new product lines. 3 in 10 companies are looking to scale up innovation. These may be signs of the industry stabilising as companies look to capitalise on potential growth opportunities.

Another strategy that some ICT companies have adopted is to train their staff. This was shared by a number of the business leaders we spoke to regarding how the company coped, especially during the time of the Circuit Breaker. In the latest survey, we found that 53 percent of companies planned to increase or maintain their training budget. This is a good step as it was also observed that companies that allocated budget for training tended to be profitable in FY2020.

You may also read more about Tech Training in our previous articles.

In addition, about 2 in 5 companies were considering seeking additional financing to stay afloat or cost-sharing with other businesses in the first half of 2021. Regarding manpower strategies, about 3 in 10 ICT companies were planning to reorganise their existing workforce or to reduce staff compensation. Fewer companies were looking at laying off staff or winding down their business.

Building a Singaporean core

The discussion on the Singaporean core in the workforce has resurfaced in the recent months due to heightened job insecurity amidst the economic downturn. The Singapore Government has pledged to work with tech companies to develop the sector’s Singaporean core, which will help the industry handle the impact of tightened foreign manpower policies.

Through IndSights Research’s conversations with business leaders, many cited the shortage of local talent with the necessary skills and manpower costs as some of the key challenges in building a Singaporean Core. Even so, nearly 2 in 5 companies reported that they are looking to hire more Singaporeans to fill new roles. Additionally, to fill roles currently held by foreigners, 1 in 5 companies considered retraining Singaporean staff, while 14 percent considered hiring more Singaporeans to fill those roles.

In terms of building the Singaporean Core, the provision of government support grants such as SGUnited Jobs and Skills Package and Enhanced Hiring Incentive are aimed at encouraging businesses to employ local talent and bridge possible skill gaps.

Support programmes

Jobs Growth Incentive (JGI) 

The JGI was launched to support and encourage companies to hire more Singaporeans from September 2020 to September 2021 (inclusive), to create good and long-term jobs for locals.

Employers will receive up to 50 percent of salary support when there is an increase in overall local workforce and local employees earning gross wages of at least $1,400 per month. It is applicable to the respective groups as follows:

• New non-mature local hires (aged under 40): Up to 25 percent of the first $5,000 of gross monthly salary for 12 months.
• New mature hires (aged 40 and above), persons with disabilities or ex-offenders: Up to 50 percent of first $6,000 of gross monthly salary for 18 months.

Additional Government support measures

The Singapore Government provides various forms of support. Some of these programmes are targeted at providing capital or creating opportunities for ICT companies. Below are some noteworthy programmes. For assistance schemes grouped according to business stage/function, visit our one-stop resource page, or search for relevant schemes at GovAssist.

Opportunities	Capital	Development
Open Innovation Platform (OIP) Virtual crowd sourcing platform that matches problems faced by companies to public solutions providers.	Enterprise Financing Scheme (EFS) – Venture Debt Programme The Government shares up to 70 percent of the risk on eligible loans with Participating Financial Institutions. Increased loan quantum from up to $8 million, up from $5 million previously.	Emerging Technology Programme Co-fund the costs of trials and adoption of frontier technologies like 5G, artificial intelligence, and trust technologies.
Enhanced Global Innovation Alliance Catalyse cross-border collaboration between Singapore and major innovation hubs globally to create opportunities and connections.	Enterprise Development Grant (EDG) Supports projects that help upgrade the business, innovate, or venture overseas. Qualifying project costs includes third-party consultancy fees, software and equipment, and internal manpower cost.	Chief-Technology-Officer-as-a-service (CTOaas) Helps SMEs uncover their digitalisation needs and transform business operations. It consolidates existing digitalisation advisory services to provide a single touchpoint for both digital consultancy and project management services.

 

About the study

This quarter’s survey collected views from 414 ICT business leaders (as part of a larger survey with 1,572 business leaders from 12 industries) in January – February 2021.

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Click for full abridged version of the findings.