SINGAPORE – Media OutReach Newswire - 8 January 2025 - KPMG in Singapore and the Singapore Institute of Directors (SID) are pleased to announce the release of our joint Budget 2025 Proposal, titled "Designing Singapore's future together: Ready, refreshed and resilient for tomorrow." The Proposal charts strategic recommendations to position Singapore as a global leader in value creation, emphasising the nation's ability to attract talent, investments, and innovation while leveraging the capital markets to generate a cascading impact across the economy. Transformational changes initiated within the capital markets will enable Singapore enterprises to align with these shifts, fostering their growth and driving Singapore's collaborative, long-term ambitions.

A key component of this vision is enhancing corporate governance standards to build investor confidence, positioning enterprises as global benchmarks for integrity and transparency. By nurturing trust and accountability across the business ecosystem – from multinational corporations to small and medium enterprises (SMEs) – Singapore can lay the foundation for inclusive, sustained growth. In addition, we recommend stimulating greater organic innovation through research and development, supported by incentives and green financing, to further drive this transformation.

Our Budget 2025 Proposal also introduces recommendations designed to create a "fast pass" approach for businesses, providing quick assistance, ready-to-use templates, and a swift start for those eager to embark on complex and long journeys in areas like sustainability and technology. This approach aims to accelerate their transformation through well-structured support systems facilitated by the government, enabling companies to adopt innovative solutions and sustainable practices more effectively, while elevating Singapore's global reputation as a hub for value creation.

The Proposal focuses on these key areas of value creation:

• Advancing ESG Priorities – Empowering Singapore enterprises to adopt sustainable practices through national frameworks, targeted grants, and reporting guidance. A dedicated industry hub will offer crucial support, ensuring businesses can align with international ESG standards and contribute to Singapore's sustainability transition.
• Driving Innovation – Harnessing blended finance and green financing initiatives to support businesses, particularly those in "hard to abate" industries, in their decarbonisation efforts. These grants and incentives help mitigate investment risks, encouraging the participation of a more diverse spectrum of funding stakeholders and cultivating a robust ecosystem of financing options. Furthermore, leveraging carbon tax revenues and enhanced government subsidies can complement these efforts, spurring further research and development efforts in sustainable technologies and accelerating the creation of commercially viable carbon reduction solutions.
• Enhancing Talent Development – Strengthening workforce capabilities through leadership benchmarks and targeted professional growth initiatives, such as micro-credentialling, while aligning with the Forward Singapore agenda. By focusing on building globally and regionally capable talent, these measures ensure Singapore's workforce is prepared to meet evolving challenges and further solidify the nation's position as a talent hub in the region.
• Supporting International Growth – Singapore can reinforce its position as a global hub by introducing strategic measures to enable businesses to excel internationally while addressing emerging challenges. Enhancing grants and financing schemes will encourage cross-border partnerships in high-growth areas such as the digital and green economies, fostering regional collaboration and supporting Singapore companies in diversifying across ASEAN. A government-backed transfer pricing advisory programme can provide consultation and financial support to small enterprises, helping them align with international standards, reduce compliance risks, and enhance operational efficiency in complex tax environments.

Highlights of Our Recommendations

1. Ready: Leading with Sustainable Impact Regionally and Into the Future

The rising global emphasis on sustainability positions Singapore to lead by example. By establishing robust frameworks and standards, the nation can solidify its climate resilience and reinforce its role as a trusted hub for sustainable business practices and long-term economic growth.

a) Increase transparency in the allocation of carbon tax revenues (page 8) to strengthen clarity in the industry to undertake green initiatives. Detailed disclosures on the use of these funds can enable businesses to align their investments with Singapore's climate agenda.
b) Develop a centralised ESG reporting hub to guide businesses in adopting consistent sustainability practices (page 12). This hub, established through government and industry collaboration, would help businesses navigate reporting requirements and align themselves with international sustainability standards.
c) Deploy incentives for blended finance to accelerate Singapore's green transition (pages 17 and 18). Strategic grants and first-loss guarantees could enhance the funding landscape for large-scale sustainable projects while supporting programmes that mitigate climate risks for vulnerable communities such as low-income groups.
d) Launch a decarbonisation assistance facility (page 19) that provides long-term financial support for businesses in hard-to-abate sectors. Grants and competitively priced loans would facilitate energy efficiency, clean energy adoption, and the exploration of innovative solutions across challenging industries.


2. Refreshed: Uplifting Tomorrow's Workforce

Singapore's workforce is integral to sustaining its competitive edge. To remain a top destination for global talent and leadership, Singapore must equip its workforce with the skills and capabilities needed to drive innovation and address future challenges.

KPMG and SID recommend:

a) Establish a National Leadership Competency Index (page 23) to help organisations evaluate and grow their leadership pipeline. This index would serve as a benchmark to track and enhance essential competencies, building a talent pool that supports local and regional growth.
b) Expand investments in micro-credentialling and increase accessibility to SkillsFuture funding (page 24). Short-term certifications in high-demand areas such as AI, sustainability, and cybersecurity would address immediate skills gaps, while tax incentives and grants can encourage businesses to sponsor such upskilling programmes.
c) Mandate regular, robust board evaluations conducted by external facilitators (page 28). By adopting rigorous performance reviews similar to the UK's standards, companies can enhance governance and transparency across sectors. Encouraging companies to develop the competencies of their directors and adopt an unbiased, objective perspective to the review process will strengthen governance and performance.

3. Resilient: Driving Innovation in a Dynamic Global Business Landscape

To stay ahead in a rapidly evolving global economy, Singapore must strengthen its position as a leading innovation hub to help businesses excel on the global stage. By leveraging its open ecosystem and providing adequate consultation and financial support, businesses can adopt cutting-edge technologies, enhance their digital capabilities and better navigate the increasingly complex tax landscape.

KPMG and SID recommend:

• - Increase funding for the development of AI governance and standards (page 32) and training initiatives to encourage ethical AI deployment (page 34). Allocating funds to R&D in AI governance technologies, such as bias detection and transparent decision-making, can address technical complexities, while introducing grants can help companies boost the adoption of responsible AI practices through continuous learning opportunities provided to their employees.
• - Develop company director capabilities in ESG navigation and innovative strategies (page 37). Firms can be incentivised to provide ongoing professional development for their directors, elevating governance excellence and thought leadership across organisations, from startups to established corporations.
• - Strengthen corporate governance through enhanced tax governance practices (page 38). Tax governance can be incorporated as an integral part of corporate governance requirements, especially for companies benefitting from tax incentives or grants.

Lee Sze Yeng, Managing Partner, KPMG in Singapore, said:

"As Singapore enters SG60, we must focus on developing leaders with foresight and expertise in sustainability and technology to drive ambitions across sectors and secure a competitive edge in a rapidly changing global landscape. A cohesive national strategy, aligned with the Forward SG agenda, is vital for nurturing future leaders. Leveraging Singapore's educated workforce and initiatives like SkillsFuture, a National Leadership Competency Index would help strengthen leadership pipelines and drive local and regional growth.

"Leadership development must emphasise two critical strategies. First, micro-credentialling will play a pivotal role in equipping individuals with industry-recognised qualifications, creating leaders who are not only well-educated but professionally competent to deliver value and impact across sectors. Second, structured apprenticeships and meaningful learning exchanges will foster collaboration, mentorship, and the refinement of practical skills. These engagements – across all leadership tiers – offer emerging leaders invaluable opportunities to broaden their perspectives and master the art of value creation."

Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said:

"Value creation is a significant challenge for Singapore amid a volatile global economy and growing concerns over digital trust, particularly with generative AI's rapid rise. The government must take the lead in driving transformation by using systemic levers, engaging industry stakeholders and implementing impactful strategies through enterprises to catalyse widespread impact.

"Key areas of focus must include accelerating green infrastructure development through diverse green financing instruments, beyond traditional blended finance. Furthermore, a fast-track (or fast-pass) approach is required to support enterprises in their sustainability and technology transitions. This must involve clear standards, ready-made templates, actionable guidance and targeted funding. Partnerships with industry to co-create these tools will be vital.

"Tax policies should strategically incentivise R&D and drive organic innovation, ensuring Singapore leads in ESG and technological advancements through sustainable and innovative growth."

Terence Quek, CEO of SID, said:

"As stewards of the organisation, directors are uniquely positioned to champion the integration of ESG principles into the core of business strategies. By fostering a culture of sustainability and innovation, directors can ensure long-term value creation, driving both responsible growth and competitive advantage. Board leadership is essential in setting the tone and aligning business models with evolving societal expectations, shaping a future where profitability and positive social impact go hand in hand."

Neil Parekh, Governing Council Member, SID, said:

"Public capital markets, along with the fast-growing private financing markets, are a very powerful engine for value creation, enabling companies to access the funding needed for innovation, expansion and sustainable growth. Directors play a crucial role in guiding businesses to strategically leverage these markets, ensuring that investments are channelled towards initiatives that not only deliver financial returns but also contribute to long-term value creation for all stakeholders."