Poorly Executed Government Funding Disease: Know the Symptoms
Catalyst Solutions Singapore, Managing Director, Dave Corbin wrote the following article as featured on Biotechin.asia
Singaporean biotechs undertake a rigorous and systematic process when developing new therapeutic technologies. They identify an issue, hypothesise a range of possible solutions, progressively develop and test each of these solutions, and finally conclude on their efficacy in solving that issue. Unfortunately, many of these same biotechs fail to apply the same rigour when attempting to access government funding, whether that be through grants or tax incentives. The process of identifying government funding is often unstructured and haphazard, and often means that time is wasted and that their financial return is less than what is should be.
Catalyst Solutions works with a range of biotechs (from start ups to multinationals) to access government funding, and the overwhelming majority suffer from one or more of the following symptoms.
Symptom 1 – applying for the first grant that comes to mind
Whether it’s because they’ve heard of someone else applying for a particular grant, or whether it’s because it’s the first grant that popped up when “Singapore grants” was typed into Google, very few businesses identify all of the grants that they could be entitled to, and then select which of these is most appropriate.
Symptom 2 – only applying for one government support program
Whilst the business generally thinks that they received a grant for ‘the project’ (i.e. Product X), the government often applies different funding for different stages of the project (development, trials, commercialisation, etc). Therefore, the business might have received government support for the development of Product X, but they missed out on additional funding that was potentially available for the trialling of Product X and for the commercialisation of Product X. Additionally, there are times when multiple government assistance programs can be accessed for the exact same stage of the project, and this is often overlooked.
Symptom 3 – the self-fulfilling prophecy application
The chances of successfully receiving government funding are directly proportional to the effort that goes into the application. Businesses that second guess themselves and think that they might not get the funding will therefore not invest the necessary time and energy into the preparation of the application, which therefore significantly reduces their chances of success. When they get rejected, which of course is extremely likely given their lacklustre application, they think to themselves ‘well, at least I didn’t spend too much time on it’.
Symptom 4 – not getting a third party to review the application prior to submission
A good grant application is a delicate balance between providing the assessor with enough information for them to feel as though they are making an informed decision and not drowning them in too much detail or with information that doesn’t relate to the qualifying criteria. Additionally, grant applications often use terminology that only makes sense to the business itself, but not to anyone outside of the business.
There are some very generous financial support programs on offer by the government to assist Singaporean biotechs to make their great ideas a reality. However, the diagnosis of Catalyst Solutions is that most businesses don’t maximise what is available.
This article is written by Dave Corbin, Managing Director, Catalyst Solutions Singapore.
Comments on the draft Tax Laws Amendment Bill (TLAB) published 8 July 2016
We must commend the current Minister of Science and Technology for opening up the discussion on increasing R&D in South Africa. Recently, there have been a number of sessions, starting last year with a breakfast on the R&D Tax Incentive, followed up earlier this year with a session on Innovation Indicators. The Minister has been extremely vocal on the need to increase technological innovation. One of the key points from the last session was the need for policy stability regarding incentives.
The 11D tax incentive was introduced in 2006 with the hopes of encouraging spend on research and development (R&D) in South Africa. We are all aware of the amendments to the incentive that required all qualifying R&D to be pre-approved by the Department of Science and Technology (DST) before the tax incentive can be claimed. Through the amendments, government hoped to increase the gross domestic expenditure on research and development (GERD) as a percentage of GDP from 0.76% (2004/05). Instead of the targeted increase, GERD has in fact stayed constant in 2013/2014 -. The issue is that while our economy may be doing better than other BRICS countries, spend on R&D is not increasing at a similar rate to those countries. In general, while it appears as though there has been activity in relation to the incentive, businesses are still experiencing a wide range of challenges in accessing the incentive.
To address the concerns in the 11D pre-approval process, on the recommendation of our MD Dov Paluch a joint government-industry task team was established comprising key industry players, consultants and government. To the Minister’s credit, she was very receptive to the idea of the team reviewing the incentive. After much deliberation and evaluation, the task team published a formal report on the key points for improvement relating to the tax incentive. Some of the major points are highlighted in the Table below:
Table 1: Summary of key recommendations from the 11D Task Team
These recommendations have been shared with Minister Pandor, and submitted for evaluation by the National Treasury as to the feasibility of these changes.
After the promising recommendations from the task team report, the team at Catalyst were eagerly awaiting the draft Taxation Laws Amendment Bill (TLAB) which was published on 8 July 2016. Disappointingly, it only contained one change to the 11D tax incentive: As tax assessments prescribe 3 years after the company’s year of assessment, delays in the 11D pre-approvals complicated the claiming of the R&D incentive. The TLAB proposed an amendment in 11D, whereby the incentive can be claimed after the prescription date (due to delays experienced from the DST).
The proposed change to 11D is by no means a significant one and does not address any of the concerns raised by the task team. Not all of the recommendations in fact require legislative change. The Minister has commented on the recommendations indicating that they will be discussed internally.
The wheels of legislative change turn slowly and although none of the recommended legislative changes have been addressed in the current draft TLAB, it is hoped that future changes and amendments to the 11D tax incentive will be made based on the recommendations of the task team.
