Local firms unlikely to invest in R&D on back of bleak business outlook

Mergers and acquisitions are also off the list.

Only 4% of local firms are likely to invest in research and development (R&D) initiatives this year, on back of a bleak overall business outlook and slow global economic recovery.

According to a report by the Singapore Commercial Credit Bureau (SCCB), majority of firms (42%) are focused on investing in machinery and capital equipment, while 35% are looking to upgrade their employees’ skills.

Another 12% of firms indicated that IT infrastructure is their most important area of investment, while only 4% of firms claimed that they are looking to invest in R&D.

Mergers and acquisitions and intellectual property initiatives are the least important area of investment for local businesses.

Low R&D investment is a persistent problem for Singaporean firms. A report by PwC in October revealed that only 6.3% of respondents had intentions to tap on the R&D tax benefits offered under the government’s productivity and innovation credit (PIC) scheme.

The Singapore Business Federation’s SME Committee blamed the low take-up on rigid qualification requirements that result in the rejection of otherwise valid claims.

“To qualify for R&D tax benefits under PIC, a project has to include “a systematic,investigative and experimental study in a field of science or technology that aims to either acquire new knowledge, create new products or processes, or improve existing products and processes”. However SMEs’ activities in R&D are often more “development” than “research” which may not qualify even if there are some elements of innovative technology application,” the SME Committee stated.