Part 2: Sovereign Industrialisation Programs. Why Governments Are Paying Startups to Make Things
This is the second article about Sovereign industrialisation of Western countries with a focus on Australia, Singapore, South Korea and Canada. Here I go into some depth around the Government programs to incentivise creating manufacturing businesses in these countries.
Australia: The National Reconstruction Fund and What Sits Around It
Australia's most significant commitment to domestic manufacturing is the National Reconstruction Fund which the federal government established in 2023 with an initial allocation of fifteen billion dollars. The fund operates as an independent investment corporation rather than a grant body which means it provides debt finance, equity investment and guarantees to qualifying businesses rather than simply handing over money that does not need to be repaid. The commercial structure is deliberate and it targets returns of two to three percent above the five year government bond rate over the medium term meaning the fund is designed to be sustainable rather than to subsidise indefinitely.
The seven priority areas the fund focuses on are resources technology and critical minerals processing, agriculture food and fibre, transport, medical science, defence capability, enabling capabilities and renewables and low emission technologies. A manufacturing startup that can make a credible case for falling within any of these areas and that has a proposal primarily based in Australia can apply at any time because the fund does not run fixed grant rounds in the way smaller grant programs typically do.
The entry point for smaller companies that are not yet at the scale where they would seek debt or equity investment from the fund itself is the Industry Growth Program which provides matched funding of fifty thousand to five million dollars for commercialisation and growth projects within the same priority areas. The Early Stage Commercialisation stream within that program is designed for proof of concept and prototyping work and a successful application requires a matched contribution from the company meaning the government puts in up to half and the company puts in the rest.
For defence manufacturing specifically there is a separate stream for small to medium businesses supporting sovereign defence capabilities where matched contributions range from fifty thousand to one million dollars and the eligibility criteria favour Australian businesses that are building capability that does not currently exist domestically.
A recent development that matters for manufacturing startups is the partnership between the National Reconstruction Fund Corporation and the Advanced Manufacturing Readiness Facility in New South Wales which is located at the Bradfield development precinct near the Western Sydney Airport site. This facility provides physical access to advanced manufacturing equipment and technical support for early stage companies and the partnership creates a referral pipeline between companies working in the facility and the National Reconstruction Fund. For a founder based in New South Wales this combination of physical infrastructure access and a referral pathway to the fund is a meaningful starting point.
The Research and Development Tax Incentive operates alongside these programs and provides a refundable tax offset of 43.5 cents per dollar of eligible R and D expenditure for companies with a turnover below twenty million dollars annually. This is not a grant and it flows through the tax system rather than through a direct application but for a startup spending money on technically novel manufacturing processes it can return a substantial portion of that expenditure.
Where to start: The business.gov.au website hosts the Industry Growth Program application process and the National Reconstruction Fund Corporation's website at nrf.gov.au describes the investment criteria and application process for larger proposals. The Advanced Manufacturing Readiness Facility website describes access to the Bradfield facility. An adviser who specialises in Australian government grants is worth engaging early because the framing of applications matters significantly and specialist advisers have a clear record of improving success rates.
Singapore: Thirty Years of Deliberate Capability Building
Singapore presents a different picture from most countries because it has been deliberately building advanced manufacturing capability for decades rather than scrambling to rebuild something that was allowed to erode. The result is an economy that is the world's fourth largest exporter of high technology goods relative to its size and that hosts significant semiconductor fabrication, aerospace MRO, precision engineering and pharmaceutical manufacturing despite having a population smaller than many individual cities.
The policy framework that governs this is the Research Innovation and Enterprise plan which runs in five year cycles and is overseen by a council chaired by the Prime Minister. The most recent cycle RIE2025 ran from 2021 with a budget of twenty eight billion Singapore dollars and a successor plan RIE2030 was launched in December 2025 with a budget of thirty seven billion Singapore dollars representing a thirty two percent increase. Manufacturing trade and connectivity is one of the four core domains and within that domain semiconductors robotics and artificial intelligence applied to manufacturing processes are explicit priorities.
For a startup or a company seeking to establish manufacturing operations in Singapore the primary entry point is the Economic Development Board which functions as a combined investment promotion and industrial development agency. The EDB operates grant and incentive programs including the Enterprise Development Grant which covers up to seventy percent of qualifying project costs for Singapore registered companies undertaking capability upgrading or innovation projects. The Startup SG programs operated through Enterprise Singapore provide early stage funding and mentorship specifically for technology startups and include co-investment matching where the government matches private investment up to a defined limit.
The National Additive Manufacturing Innovation Cluster which was established under previous RIE plans and continues under RIE2025 and RIE2030 provides access to equipment and technical expertise for companies developing additive manufacturing processes and is specifically designed to bridge the gap between research and commercial production. For a drone or hardware startup interested in establishing production in Southeast Asia using Singapore as a base the cluster provides a meaningful combination of physical access to equipment and connection to the broader institutional ecosystem.
What is distinctive about Singapore's approach relative to most countries is the consistent long term commitment. The RIE plans have run without interruption since the early 1990s and the institutional relationships between the government agencies, the universities and private industry have accumulated over that time in ways that make the system genuinely functional rather than aspirationally designed. A startup accessing Singapore's programs is engaging with an ecosystem that has been refined through many iterations rather than a policy that was invented last year.
Where to start: The Enterprise Singapore website at enterprisesg.gov.sg and the Economic Development Board at edb.gov.sg both describe current grant programs with eligibility criteria. Startups that are not yet registered in Singapore can make initial enquiries through both agencies about what would be required to qualify and what levels of support are available for different types of manufacturing activity.
South Korea: Industrial Policy at Scale
South Korea's approach to sovereign manufacturing is concentrated and large in scale. The semiconductor industry is the clearest example and the numbers are instructive for understanding how seriously the government takes industrial strategy. In May 2024 the government announced a twenty six trillion won package of support for the semiconductor industry and that package was subsequently expanded to thirty three trillion won in April 2025 in response to US tariff uncertainty. Alongside the financial support the government is developing what it describes as the world's most advanced chipmaking complex in the Yongin and Pyeongtaek areas south of Seoul covering twenty one million square metres and designed to bring together Samsung and SK Hynix's production capacity alongside a cluster of equipment manufacturers and fabless design companies.
For smaller companies and startups the K Semiconductor strategy includes specific components aimed at the wider ecosystem rather than just the large established players. The government established a one trillion won semiconductor ecosystem fund designed to provide support to promising fabless companies and suppliers of materials, parts and equipment. Mini fabrication facilities which replicate actual mass production environments are being established specifically so that fabless startup companies can test designs and processes without needing access to a full commercial foundry. The IC Design Education Center which has operated since 1995 provides universities and by extension startup founders emerging from academia with access to chip design tools and multi project wafer shuttle programs at significantly reduced cost through agreements with Samsung, TSMC and other foundries.
The Ministry of SMEs and Startups manages a separate portfolio of programs aimed at manufacturing and technology startups more broadly. The Super Gap Startup program supports startups in emerging industries including AI manufacturing technology and robotics and the ministry committed a budget of 2.23 billion US dollars across its startup programs in 2025. South Korea's National Growth Fund established in September 2025 with 150 trillion won is intended to support national strategic industries and expand investment in startups with a KDB pipeline of low interest loans available for companies in qualifying sectors.
For a startup with manufacturing ambitions and South Korean roots or a company seeking to establish production in Korea the combination of the semiconductor ecosystem fund the Ministry of SMEs programs and the Korea Development Bank loan facilities creates a layered set of options that covers early stage through to growth scale.
What South Korea demonstrates that other countries are beginning to emulate is the cluster approach: concentrating related industries and suppliers in a defined geography so that the relationships between them develop naturally from proximity. For a startup this means that locating in or near one of the designated strategic industrial zones can provide access to customers, collaborators and talent that would take years to cultivate in an isolated location.
Where to start: Invest Korea at investkorea.org provides English language information about government incentive programs for businesses establishing operations in Korea. The Ministry of SMEs and Startups at mss.go.kr administers the startup programs described above and publishes annual summaries of available funding with eligibility criteria.
Europe: The Net Zero Industry Act and the Acceleration of Renewable Energy Technologies
Europe's approach to rebuilding manufacturing is primarily framed around the energy transition and the Net Zero Industry Act which came into force in June 2024 sets the legislative framework. The act establishes a target for the EU to manufacture domestically at least forty percent of its annual deployment needs for net zero technologies by 2030 and it identifies specific technology categories as strategic including solar photovoltaic, wind, batteries, electrolysers, heat pumps, carbon capture and grid technologies.
What the act does that is practically useful for a manufacturing startup is not primarily the target itself but the regulatory streamlining that accompanies it. Net Zero Strategic Project status granted to qualifying manufacturing projects entitles those projects to fast track permitting processes at the national level which in practice means that the bureaucratic timeline for establishing a new manufacturing facility can be significantly shortened. In the EU member states with complex permitting environments this compression of timelines can be worth as much as the financial support because the cost of uncertainty during the permitting period is a real constraint on investment.
The act also introduces Net Zero Acceleration Valleys which are geographic clusters designated to concentrate manufacturing investment in specific technology areas at the regional level. These function similarly to the Korean semiconductor cluster concept and provide a geographic focus for manufacturing investment that makes it easier for startups to locate where customers, suppliers and skilled workers are concentrated.
The EU Innovation Fund which sits alongside the Net Zero Industry Act provides direct funding for large scale commercial demonstration projects in innovative low carbon technologies including manufacturing. The fund has distributed several billion euros across multiple rounds and while the larger tranches are designed for projects that already have significant scale there are smaller project tracks that are accessible to companies at an earlier stage.
Individual member states also run their own programs which stack on top of the EU level support. Germany's Federal Ministry for Economic Affairs administers funding for industrial transformation projects. France's Invest for the Future program dedicates substantial funding to decarbonisation of industry including manufacturing. The Netherlands' Top Sectors policy co-funds innovation in high technology manufacturing through public private partnerships with universities and research institutes.
For a European startup the practical starting point is understanding which member state programs are available in the country where the business is registered before seeking EU level support. The stacking rules that govern how national and EU funding can be combined matter significantly to the total support available and a specialist in EU state aid rules is worth consulting before structuring a funding application.
Where to start: The European Commission's single market economy website at single-market-economy.ec.europa.eu describes the Net Zero Industry Act programs and strategic project application process. The EU Innovation Fund website at climate.ec.europa.eu/eu-action/funding-and-carbon-price/innovation-fund describes open funding rounds. National contact points designated under the act in each member state handle strategic project applications at the country level.
Canada: The SR&ED Program and the Strategic Response Fund
Canada's most accessible manufacturing support program is the Scientific Research and Experimental Development tax credit which is known universally as SR&ED and pronounced as shred. The program has been running for decades and it provides a refundable tax credit on eligible R and D expenditure that is unusually generous by international standards. For a Canadian controlled private corporation the enhanced refundable credit rate is thirty five percent of eligible expenditure up to a limit that was doubled in the 2025 federal budget from three million to six million dollars meaning the maximum refundable credit is now 2.1 million dollars per year.
The 2025 budget changes that doubled the enhanced limit also reinstated capital expenditure eligibility which had been removed in 2014. This change matters considerably for manufacturing startups because the equipment and facilities used for R and D work can now be included in the claim. A company buying or leasing a CNC machine a 3D printer or a welding robot to develop a manufacturing process can now claim a portion of that cost through SR&ED alongside the salary costs of the people doing the technical work. Combined with provincial top up programs in Quebec Ontario and British Columbia the total effective credit rate for eligible expenditure can reach sixty five percent in Quebec and forty five percent in British Columbia which means that for every dollar spent on qualifying manufacturing R and D the government returns between forty five and sixty five cents.
The Industrial Research Assistance Program provides non repayable grants of up to ten million dollars for SME innovation and covers eighty percent of eligible technical salary costs. It operates through a network of industrial technology advisers who work directly with companies to identify eligible work and structure applications so it is accessible even to founders who are not experienced with government funding processes.
The Strategic Innovation Fund was replaced in September 2025 by the Strategic Response Fund which operates with a five billion dollar budget and provides both repayable contributions and non repayable grants for large scale transformative projects in key sectors including advanced manufacturing aerospace cleantech and critical minerals. The minimum project size for SRF investment is generally larger than what an early stage startup would typically pursue but for a company at growth stage that is ready to make a significant capital commitment to a production facility the SRF provides a meaningful source of co investment.
The NGen Advanced Manufacturing Supercluster has funded 173 projects with a combined value of 607 million dollars in advanced manufacturing research and development across Canada and while its core project programs were on hold in early 2026 it represents the kind of sectoral collaboration vehicle through which a startup can access not just funding but connections with established manufacturers who can serve as customers or channel partners.
Canada's combination of SR&ED and IRAP creates a situation where a manufacturing startup doing technically novel work can access meaningful non dilutive funding from the start of operations rather than needing to reach a scale threshold first. The SR&ED credit is available regardless of company size or stage and the IRAP program explicitly targets SMEs so there is no minimum scale requirement that needs to be met before the programs become accessible.
Where to start: The Canada Revenue Agency's SR&ED overview at canada.ca describes the program in detail and the agency recommends engaging a specialist SR&ED consultant or using an approved SR&ED claim preparation service for the first claim given the documentation requirements. The IRAP website at nrc.canada.ca describes the industrial technology adviser network and how to connect with an adviser who covers the relevant region and technology area. The Strategic Response Fund application process is managed through Innovation Canada at ised-isde.canada.ca.
For Founders and Innovators
The programs described above share some common features that are worth understanding before approaching any of them.
All of them prefer companies that have a clear technical story as Governments are not investing in products they are investing in capability and a strong application describes what technical problem the company is solving and why solving it builds a (national and sovereign) capability that does not currently exist domestically. A company that can articulate why its manufacturing process represents a genuine advance rather than a replication of what an established player already does has a significantly stronger application than one that describes its products without reference to the underlying technical challenge.
All of them respond better to early engagement than to late applications. Most of the programs described above have some form of pre application conversation or advisory stage and using that stage to understand what the program is looking for and whether the project is a genuine fit saves time on both sides. The IRAP industrial technology advisers in Canada and the Enterprise Singapore advisers are both examples of advisory resources that are available before a formal application is submitted.
Many of them can be stacked or run in conjunction with other programs. SR&ED and IRAP can be used on the same project in Canada. Australian grant programs can sit alongside National Reconstruction Fund investment. EU funding can stack with member state programs within state aid limits. Understanding which programs are stackable and how to structure applications to take advantage of that is where a specialist adviser adds the most value relative to working through the programs alone.
The common thread across Australia, Singapore, South Korea, Europe and Canada is that governments have decided manufacturing matters and are spending real money to encourage it. For a startup that is genuinely building something new and is willing to engage with the application process the question is not whether support is available but whether the company can make a credible case for why it deserves it.
The manufacturing era that is coming into being is not the same as the previous industrial era - it is lighter, faster, more automated and more reliant on domestic engineering capability than on low labour costs. The founders who are best positioned to benefit from the government programs being built to support it are the ones who understand both the technology and the policy and can speak fluently to both.
This was part 2 of the sovereign industrialisation programs, to read the first introductory article go to part 1 of industrialisation programs.
