In a bid to further develop Singapore as a smart financing ecosystem that is able to support further growth, the Singapore Government has announced a new International Partnership Fund (IPF) during Budget 2017. In this first ever equity investment scheme, the Government will commit up to S$600 million of government capital and, for the first time, be co-investors alongside Singapore-based enterprises. The objective of the fund is to help local firms scale up and internationalise by overseas expansion.
Under the IPF, Temasek Holdings' private equity unit Heliconia Capital Management will link up with Singapore-based enterprises as a consortium partner to co-invest in a target company. Heliconia may also tap on its networks to source for meaningful deals.
Although there is no specific sector focus for tapping on IPF, there is an important criteria: In order to qualify for IPF, partnering firms must have their headquarters in Singapore and generate annual revenue of S$800 million or less.
While further details beyond this have not been released, the Ministry of Finance has stated that the fund will be launched at the end of the year which bodes exciting times ahead for the local enterprises which are considering venturing further afield.
The general consensus is that the IPF is a positive step to support Singapore-based firms in their growth. The funding, support and the knowhow provided by the Government will allow firms that possess the potential, but not the capital or knowledge, to expand into markets that they would not be able to enter on their own.
However, there has been also been a cautious response accompanying the IPF. For instance, one group of stakeholders that have expressed their reservations are Small-Medium Enterprises (SMEs). Their main concerns are that the high qualifying threshold of up to S$800 million in annual revenue is an indication that the IPF is targeted at larger companies and that, consequently, SMEs would miss out on the opportunity to internationalise.
At this juncture, it is perhaps prudent to adopt a wait-and-see attitude as more details of the IPF are announced in the coming months. As this is the first time that the Singapore Government is directly co-investing alongside local businesses, as opposed to investing with fund managers and financial investors, it is likely that new issues concerning risk allocation, control and management will arise.