Singapore’s economy has been slowing down because of global uncertainties, trade tensions and large-scale social movements. While the manufacturing sector has reported a gradual decline, economic growth was projected to be between 0 and 1 per cent for 2019. The global outlook has also weakened in part due to US-China trade tensions.
As technology becomes more advanced, global risks such as climate change, demographic shifts and political instability have also affected governments, enterprises and civil society groups, calling for greater public-private collaboration to tackle such risks. Despite these uncertainties, there is cause for optimism due to Singapore’s financial and political stability, well-established infrastructure, competitive tax, availability of skilled labor and international mind-set.
These factors, when combined with the best technology enablers and resources, will put Singapore at the forefront of transformation, thus paving the way for our nation to become the Transformation Capital of Asia.
In this proposal, we will identify key disruptive forces to our economy and share recommendations to manage and mitigate their impact, while fully noting that some of these measures may have been implemented by the government.
We are calling for the government to protect and grow our workforce and economy in this highly uncertain global environment, while closely monitoring the unilateral measures taken by other countries that can affect trade flows vis-à-vis taxes in our country.
Hence, against the background of the current social and economic uncertainties, the post-effects of Brexit can possibly exacerbate trade tensions and lead to a multipolar world, thereby impacting international tax development. It is likely that the continual downward pressure on corporate income tax (CIT) in other advanced economies, notwithstanding G20/OECD-led efforts, will put Singapore’s CIT under some pressure.
Practical efforts are urgently required for coastal protection, climate-resilient infrastructure and relevant ‘green’ initiatives involving the use of intelligent automation.
Therefore, given Singapore’s geographical vulnerabilities, we recommend more investment in climate risk experimentation in order to explore feasible solutions that will safeguard our interests and our business performance.
Against a dampened economic outlook, enterprises are trying hard to defend their market positions and maintain a competitive advantage in Singapore. Mergers and Acquisitions (M&A) continue to play a key role in how enterprises respond to disruptive forces. However, it is important for companies to understand that embarking on a digital transformation journey is an inevitable step towards staying relevant in this dynamic market environment.
With that said, we also note the prevailing challenges faced by enterprises. Digital technologies such as machine learning, data analytics and intelligent automation have provided tangible benefits for enterprises, but many still lack specialized skills to implement them.
The greater adoption of technology in Singapore has also had a profound impact on security and data issues. According to a KPMG study conducted on consumer trust, there is indication that cyber risks will be passed down to consumers as digital transformation takes place.
Similarly, costs involving the use of AI could be passed down to consumers, which will add further pressure on enterprises trying to transform digitally.
In fact, KPMG’s findings showed that only 16 per cent of enterprises have successfully implemented AI in real terms. Technology can be an effective business enabler for increasing productivity. For this reason, enterprises need to better understand the kinds of data being tracked, how it is used and why data privacy should be treated as part of a strategic data transformation.
On a broader scale, Singapore’s ageing population has further implications on enterprises as well. Managing rising staff healthcare, training costs and upskilling workers digitally are key challenges, among others.
In short, 2020 will be a time to protect and grow Singapore enterprises through the effective deployment of digital technology. By doing this, Singapore will be in a better position to build a sustainable tax base, sharpen global competitiveness and create more meaningful employment opportunities for its people.
1. Some findings in this proposal are reinforced by The KPMG Global Sensory Advantage Ecosystem (SAE), which is a strategic research capability that identifies “early signals of change” across social, technological, economic and political (STEP) dimensions.
2. KPMG Global CEO Outlook (2019). The survey data published in this report is based on a survey of 1300 CEOs in 11 economies: Australia, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. The survey was conducted between 8 January and 20 February 2019.
3. World Economic Forum, Dynamic Briefing on Geopolitics, Retrieved September 2019.
4. Francis Fukuyama, Identity: Contemporary Identity Politics and the Struggle for Recognition. (2018). P.165.
5. Liliana Mason, Uncivil Agreement: How politics became our identity. (2018). p.3.
6. KPMG research found that 84 per cent of organisations have moderate or high M&A appetite for the next three years.
7. KPMG SAE research.
8. WEF research from Dynamic Briefing in Financial and Monetary Systems. Retrieved in September 2019.
9. The report is based on a survey of 1802 security executives in 24 markets, across 12 industries. All respondents were from companies with annual revenues between USD100 million to USD10 billion or more. The sample included all age categories, with a higher percentage of Millennials and Gen Xers, as well as diversified by gender.
10. Research by KPMG Consumer Loss Barometer (2019).
11. SAE research conducted via a seed study on 5G.
12. KPMG analysis.
13. In September 2019, IMF reported that the US-China trade war would lower global GDP by 0.8 per cent in 2020. Retrieved on: https://asia.nikkei.com/Economy/Trade-war/US-and-China-tariffs-could-lower-global-GDP-by-0.8-in-2020-IMF.