Ready, Refreshed and Resilient: How Singapore can position itself for 2025 and beyond?

In this video episode of Singapore Budget 2025 Insights by KPMG in Singapore, Priscilla Koh, Director, BEPS COE, spoke to Ajay Kumar Sanganeria, Partner, Head of Tax, and Mark Addy, Partner, Energy & Natural Resources and Telecommunications, Media and Technology, Tax, to discuss how Singapore can establish itself as a key player in a complex and volatile international business landscape and create lasting value in the areas of sustainability, human capital and digital readiness. 

Read video transcript below.

Could you give us a quick overview of some of the key challenges that you see businesses face as they step into 2025?

Ajay Kumar Sanganeria: As we step into 2025, challenges for businesses continue to increase at the back of four key trends. The first one is the increase in tariffs. As large countries start to look more inwards and adopt more trade protectionism approaches through higher tariffs, other countries may follow a similar approach. This may result in Singapore companies finding it difficult to access global markets freely.

Second, rising geopolitical tensions. These tensions can divide the world further, leading to disruptions to international and trade partnerships and create uncertainty for companies.

Third, climate change and related regulations are causing major shifts in global supply chains, which will affect supply and demand patterns.

Last, but certainly the most impactful is the pace of technological change and particularly AI, which will require companies to innovate rapidly and upskill their talent to stay competitive. The key to tackling these challenges is to be ready and stay ahead of the curve. Given this context, our Budget proposal this year focuses on how Singapore can support companies and individuals to maintain its competitiveness in three critical areas.

The KPMG Budget proposal this year focuses on the three Rs, Ready, Refreshed and Resilient. Could you give us a brief overview of what the three Rs are and what some of the key recommendations that we have outlined under each of the “R”s?

Ajay Kumar Sanganeria: The first chapter, Ready, focuses on how Singapore can lead with sustainable impact. In order for businesses to be more sustainable, support will need to be put in place to ensure that operating environment is ready for them to progress on their sustainability journey as smoothly as possible. Some of our recommendations touch on providing assistance to companies to manage sustainability reporting requirements and scale up blended finance through various tax schemes and grants. It is also important to ensure this transition is inclusive, which means support for both large and smaller companies.

The second chapter, Refreshed, which is focused on talent, talks about how the local workforce needs to be future-ready and with better leadership skills to navigate companies in the increasing complex environment, as I mentioned earlier. We have also proposed suggestions on how Singapore can build stronger talent pipeline in emerging areas like ESG and AI.

The third chapter, Resilient, talks about how Singapore will need to take steps to drive innovation and retain its status as one of the world's most digitally advanced economies. Our recommendations are centered around ensuring that Singapore has the right ecosystem to foster such creativity, whether it is through grants or other forms of support. They also touch on how businesses can be well-supported when they venture to overseas markets.

In our proposal, we talked about the importance for Singapore to drive a sustainable impact for the region. Could you share more about how you see Singapore doing this?
 

Mark Addy: The first thing to acknowledge, Priscilla, is that Singapore has done very well so far to establish itself as a leader in the area of sustainability. Now, we all know how quickly things develop in this area and it is really important that Singapore continues to have the right policies and the right frameworks in place to maintain its status as a leader.

We have three core recommendations in our Budget proposal for this year in relation to sustainability. The first recommendation is to develop a centralised ESG reporting hub. This will provide companies, especially those with cost or resource constraints, with assistance and guidance when it comes to interpreting what can be very complex ESG regulations.

Second, we would like to see the creation of a Decarbonisation Assistance Facility. Now, what do I mean by that? This is a facility that will provide financial support to hard-to-abate industries, such as maritime, aviation and heavy industry, all of which are key pillars of Singapore's economy. This will offer long-term financing in the form of grants and attractively priced loans to enable those companies to more quickly implement clean energy measures across their value chains.

Last, we would like to see a tax deduction scheme established similar to what we see with the Productivity and Innovation Credit Scheme from a few years ago which relates to qualifying investments in sustainability and this will encourage companies, and especially those really important SMEs, to participate in the energy transition without worrying about losing their competitive edge.

How important do you think it is for our Budget 2025 to focus on SMEs in this area and in what way do you think this will help them better prepare for the future?
 

Mark Addy: It is a great question. I read recently that 99 percent of businesses in Singapore are SMEs. That tells you the importance of SMEs to Singapore's economy and we really cannot afford to leave them behind as we advance towards an AI future. When we look at the disparity in deployment of AI between large companies and SMEs, it is quite significant. It reveals inadequate access to capital, inadequate access to talent, and also implementation know-how among SMEs.

What we would like to see as part of Budget 2025 is a narrowing of the AI gap between large companies and SMEs by encouraging the adoption of things like technology enablers which gives SMEs the foundational resources required to implement AI without incurring significant capital spending.

We would also like to see targeted grants for AI related investments specifically for those SMEs that maybe do not have the funding available to invest in these things. We would also like to see more funding for programmes which are looking at upskilling AI skills in workforces across all different levels.  That will benefit both the individuals and the companies that they work for.

Earlier on, you highlighted the need for the Singapore workforce to be upskilled to meet the demands of the future. This requires a fresh approach from business leaders to advance the nation's talent strategies. Management themselves also need to be equipped with the right people and skillsets to build long-term value for their firms. How do we ensure that businesses have the right kind of leadership to drive all of this?
 

Ajay Kumar Sanganeria: Companies understand that strong leadership will be necessary to navigate through a more volatile and challenging business environment and they need to groom such leaders. To do so, companies are individually identifying required competencies and managing their own talent pipeline.

To support them and ensure more consistency in the process, we are suggesting a Government-backed National Competency Index, which companies can refer to as benchmark to build leadership talent in a consistent and coordinated manner. The second aspect would be stronger governance and the board plays a very important role here. We are suggesting for the Government provide support for development and accreditation of board members, as well as for younger leaders to do board apprenticeships, to be better prepared for tomorrow and provide stronger governance oversight to companies.