Mr Lee Yi Shyan at the World Entrepreneurship Forum, 20 Nov 09

PRESENTATION BY MINISTER OF STATE FOR TRADE & INDUSTRY AND MANPOWER, AND MINISTER IN CHARGE OF ENTREPRENEURSHIP, SINGAPORE, MR LEE YI SHYAN, AT THE WORLD ENTREPRENUERHSIP FORUM ON 20 NOVEMBER 2009, 8.30AM.      

Mr. Patrick Molle, President of EMLYONBusinessSchool

Mr. Jean-Luc Decornoy, President of KPMG SA

Members of World Entrepreneurship Forum Think-Tank

Ladies and gentlemen

Good morning    

Introduction

It is my honour to be part of the World Entrepreneurship Forum Think-Tank to learn from many distinguished members and to share on Singapore’s experience in entrepreneurship development.I would like to first thank and congratulate EMLYONBusinessSchool and KPMG for putting this World Entrepreneurship Forum together.This cannot be a more timely initiative.As we emerge from the global economic doldrums, it becomes more evident that entrepreneurship and innovation will drive global recovery and the next wave of growth.

Singapore believes in the importance of entrepreneurship in economic growth, and we are building an eco-system that facilitates start ups and SMEs.While we have achieved some milestones, we are not there yet.I therefore, look forward to learn from our distinguished counterparts at this forum, and also to forge collaboration and partnerships to drive entrepreneurship to a higher level, both locally and globally.

Before I start to talk about entrepreneurship development in Singapore, to put things in context, allow me to first bring you through Singapore’s economic history.Then I’ll go on to share about the genesis of our entrepreneurship efforts, and the role that the government has played, including some of the key focus of our efforts.

Evolution Of The Singapore Economy

Singapore's economic growth thus far is phenomenal.At the end of the 1950s when we achieve self government, Singapore's per capita real income was only 15% of United States.By 1983, its per capita income of more than US$6,000 was halfway to the industrial market economy countries’ average of US$12,000.By 1996, the percentage stood beyond 90%, outpacing Japan and Hong Kong, in both the level and the rate of growth.Singapore’s per capita Gross Domestic Product (GDP), of US$36,000 in 2008 is above that of Japan, UK and Germany.

Singapore’s economic success is intricately related to its political evolution.She achieved self–government from British rule in 1959 and gained independence from the Federation of Malaya in 1965.The template for economic growth was altered significantly when Singapore gained independence in 1965.It became clear that the small size of the Singapore market would constrain inward looking growth strategies in the absence of a hinterland in Malaysia.Rapid growth only followed economic re-structuring, which concentrated on exports and foreign direct investments.

Since the late 1970s, there has been a wave of economic reform and liberalisation in Asia. China's economic reform programme in 1978 led first to a boom in trade via Hong Kong and then to an upsurge in foreign direct investments into China.The transformation in ASEAN was no less dramatic. Indonesia liberalised foreign investment in 1983, Malaysia and Thailand in 1986. India, after years of pursuing economic self-reliance, opened up in 1991.

The liberalisation has made the region as a whole, including Singapore, more attractive to foreign investors.This formula worked well for us into the 70s and 80s.By encouraging MNCs to locate here, Singapore took a short cut in industrialisation – acquisition of know-how, management expertise and market.We improved productivity and upgraded the industries, so that higher-value jobs were created.From timber and textiles to semiconductors and electronic, and now to nanotech and biotech.

Then the Asian Financial Crisis hit us in the late 90s, followed by the dot-com bubble burst in 2000, then 9-11 in 2001, and SARS in 2003.We quickly moved to restructure our economy to propel further growth.An Economic Review Committee chaired by the then Deputy Prime Minister, now Prime Minister Lee Hsien Loong, was formed, comprising political leaders, business leaders, and academic leaders.Singapore understands it can no longer compete on being an efficient place for business. Increasingly, it has to be a knowledge-based, differentiation-based, innovation-based economy. That’s a very challenging transition.Specifically, we resolved to remake Singapore into a creative and entrepreneurial nation willing to take risks to create fresh businesses and blaze new paths to success

The Drive For Entrepreneurship Development

Once our mind was set, we quickly rolled up our sleeves and got down to work.What we had done could broadly be grouped under two new areas.First, there was the need to set up the structures and the environment for entrepreneurship to thrive.Then there was the issue of raising entrepreneurs who would tap on these structures and make use of the favourable environment to create value to succeed.

Let me first touch on the perspective of structure and environment.

Establishing A Pro-Enterprise Structure

A Minister in charge of Entrepreneurship and

An Agency to Drive Entrepreneurship

First, in line with the recommendation of the Economic Review Committee to appoint an agency dedicated to entrepreneurship development in Singapore to be headed by an individual who has both the support from the private sector and the influence within the government to effect change, the Prime Minister appointed a Minister in charge of Entrepreneurship in 2003.This has been a standing position, and I am currently third Minister appointed to be in charge of Entrepreneurship.My role is to facilitate and to be a cheer leader for entrepreneurship in Singapore.

Furthermore, we do not have a government agency dedicated to entrepreneurship prior to the Economic Review Committee.We restructured and refocused one of the existing government agency, the then Productivity and Standards Board, to be the enterprise development agency; SPRING Singapore.Its mission became to grow innovative companies to foster a competitive SME sector.SPRING Singapore works with partners to help local enterprises in financing, capabilities and management development, technology and innovation, and access to markets.

Public-Private Sector Collaboration

My predecessor, the first Minister in charge of Entrepreneurship, realised that having a Minister and a group of public servants drive Entrepreneurship sounds like an oxymoron.The private sector and the entrepreneurs themselves must be involved.He therefore invited a group of entrepreneurs who were passionate about entrepreneurship development to form an action group to drive entrepreneurship development from the private sector perspective.

Hence a public-private sector collaborative movement known as the Action Community for Entrepreneurship or ACE in short, was established. ACE is a group of entrepreneurs working together with government officials to enhance the entrepreneurship landscape in Singapore. I helm the group as Minister in charge of Entrepreneurship, but the success of a group like this really depends on the passion and the drive of the entrepreneurs behind it. This birth of ACE marks the beginning of a new era for entrepreneurship in Singapore.

Creating A Pro-Enterprise Environment

In building our entrepreneurship landscape, ACE structured itself into different Action Crucibles.Notice the careful choice of words here.The Action Crucibles or ACs were not structured to be Advisory Committees, as what we in the government are fond of doing.The idea behind this was that the entrepreneurs were not content with simply coming together to talk shop and surface ideas.They wanted to drive change.They expect these Action Crucibles to not only come up with the ideas but also to work with the government officials to execute these ideas so that entrepreneurs may benefit.For a start the Action Crucibles focused on four areas:

- Culture and Education;

- Rules;

- Financing; and

- Internationalisation.

Let me share on ACE’s work by starting with Rules and Financing first, which are more tied to the environment.

Reviewing Rules to Build a Pro-Enterprise Environment

Under this area, the ACE Rules Action Crucible works with the government through the Pro-Enterprise Panel to cut red tape to reduce regulatory burden on enterprises.The Pro-Enterprise Panel is chaired by the Head of Civil Service to seek and act on suggestions from the public, in particular from entrepreneurs, on how government rules and regulations can be updated and improved so that we do not overly burden them with rules that could be unnecessary, unsuitable, or simply outdated.

For example, we had a lady who wanted to produce and sell wine by using a simple fermentation method at our food centres in Singapore.She realised that she had to fork out some S$28,000 in license fee. This might have been an appropriate fee to set for large breweries or wineries producing large quantity for export and distribution, but was astronomical in the eyes of a small business owner.With the intervention of the Pro-Enterprise Panel, the fees were subsequently lowered to S$5,000, a mere fraction of the original fees.This example is but one of almost one thousand rules changed since we began this process.That is not a bad record, considering we have only received about 1,800 suggestions from the public.We accepted and implemented more than half the suggestions.

But ACE recognised that responding to feedback is insufficient.It has to work with the government agencies to permeate a pro-enterprise mindset among government officials, particularly regulators.Hence ACE started the annual Pro-Enterprise Ranking of Government Agencies, where through a survey, enterprises provided honest feedback to agencies on their pro-enterprise orientation, on how their rules are transparent, and on how they fared in customer service.This survey has been useful in driving a collaborative mindset between government regulators and entrepreneurs.

Facilitating Financing for Entrepreneurs

Another important area of ACE’s achievements is in financing.Financing has been a perennial challenge for entrepreneurs. ACE therefore saw it as its key challenge to ease access to financing for entrepreneurs.

Hence, over the years, ACE worked with various partners to launch various initiatives to make it easier for entrepreneurs to obtain financing.In particular, the Local Enterprise Financing Scheme and the MicroLoan Programme helps to alleviate the financial institutions’ risk averseness in lending to small business by sharing the risk of default with them.The risk that the government underwrites was increased from 50% to 80% or even 90% in some cases over the past year due to the credit crisis.This Special Risk-sharing Initiative, to help enterprises tie over cashflow during the current crisis, has helped them raise over $600m in loans.

Besides loan programmes, ACE also worked with the public and private sectors to roll out various equity schemes to benefit primarily startups.An example is the Over-The-Counter (OTC) private equity trading platform which offers companies with high growth potential, but who are not ready for public listing, an avenue to access private equity financing.

Through the various initiatives rolled out over the past five years or so, financing has dropped out of the top three issues face by entrepreneurs in running their SMEs.

Creating Global Entrepreneurs

Let me now move on to talk about what is arguably the toughest of the issues, the holy grail of entrepreneurship development that we seek.Can we raise the next big entrepreneur?How do we do that?

Entrepreneurial Culture and Education

The biggest challenge in fostering a vibrant enterprise sector is changing the mindset of the people. This means developing instincts to sense opportunities and take calculated risks, coupled with a strong passion for adventure and achievement. ACE has been working tirelessly over the years to promote such a mindset. One of the flagship events is the BlueSky Festival. The term BlueSky connotes freedom, openness, unlimited possibilities and optimism, the exact characteristics we endeavoured our entrepreneurs to possess. The BlueSky Festival brings together entrepreneurs, financiers, government officers and like-minded people to exchange ideas, share experiences and to recognise the critical role entrepreneurs play in Singapore’s economic development. Besides local entrepreneurs, we have also had foreign entrepreneurs such as Tony Fernandez of Air Asia, Eric Xu of Baidu.com, and Bo Fishback of the Kauffman Foundation as our distinguished speakers. This event has reached out to some 25,000 participants over the last six years, and has helped to raise the profile of entrepreneurs.

But changing cultures needs to start from young.More recently, we launched the Young Entrepreneurs Scheme for Schools or YES! Schools to provide resources to help schools develop and implement entrepreneurship learning programmes inculcate entrepreneurial traits and skills. For example, through this programme, two 14-year old boys, with mentorship from their science teacher, developed a circular fridge. Inside the fridge, a Lazy Susan spins around, making it easy to retrieve food items from the back.They are looking forward to have a chance at commercialising their invention.Since the programme was launched last year, we have funded close to 10% of Singapore’s schools, reaching out to some 6,000 students.

In addition to YES! Schools, we also have YES! Startups which encourages our youths to hone their entrepreneurship skills and set up viable business with a S$50,000 grant for first-time young entrepreneurs. Since its inception last year, we have supported 38 start-ups and committed $1.8 million. An interesting business idea that rose from this programme is FR3b (pronounced as Freebie), Singapore first sampling concept stores started by a twenty year-old girl. It provides a platform for its clients to display their samples and for its members to personally pick up the samples. In a short span of one year since it first started, Freebie has secured more than 40,000 online and retail membership.

Through ACE and partners’ efforts, Singapore has seen a tremendous improvement in our entrepreneurship culture. Our start-up formation figures increased from only 15,000 in the 1980s to some 50,000 in 2009. Our entrepreneurs are getting younger with two-third of them below 40 years old; and more educated with three-quarters of them holding tertiary education. In a survey done in 2008, on the start-up community in Singapore, we found that 84% of them would not give up their business for better job opportunities. That is a great testament and affirmation that our hard works have not gone to waste.

Internationalisation and Mentorship

Last but not least, while we work at the softer aspects of mindsets and cultures, we realise that we need success to inspire success.We need more enterprises that have made it.Once there are enough of them to form a critical mass, a virtuous circle would have started.

So we have put in some effort to groom winners.ACE has the Internationalisation Action Crucible, which was set up to mentor a ready enterprises to internationalise.The AC would help the company identify key impediments that stand in the way of its business expansion and give ideas and expert advice for business internationalisation.So far eight companies have undergone this mentoring process in expanding overseas.What is encouraging is that some of these companies have decided to take over the baton and join the programme to mentor a new cohort of Singapore companies.

The Entrepreneurial landscape in Singapore

The efforts of the Singapore government working with ACE and other partners resulted in Singapore receiving many prominent accolades including maintaining First in World Bank’s “Ease of Doing Business” survey for the fourth consecutive year, being the most innovative nation in the world, according to a study jointly produced by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI) and third in world competitiveness ranking according to World Economic Forum Global Competitiveness report.

This pro-enterprise environment can also be seen in numbers.Currently, Singapore has some 161,000 enterprises which employs 62% of the workforce and contribute 48% of the total value added. Our patent applications also increased by 45% in the last decade.A recent survey with our varsities showed that 1 in 5 of the graduates would like to start a business and be their own boss.More businesses are formed each, from 36,000 in 2002 to almost 50,000 in 2008.This translates to 103 businesses for every 10,000 Singaporeans, which is double that for the United Kingdom (53) and Finland (56), though only half of that in the United States (207).

Moving Ahead

Challenges caused by global financial crisis

The global financial crisis has affected our economy and entrepreneurs. More fundamentally, it has changed the way things are done.While it is a tough period for many of us, I remain confident that the global economy will turn around, probably through innovation by entrepreneurs. What remains then is how the landscape will change, and whether we would be prepared to ride the waves.

Building Singapore as an Entrepreneurial Hub

The government next focus is not only to make Singapore more entrepreneurial, but also a hub where entrepreneurs and innovators can connect to markets, capital and talent via Singapore and Asia. We hope to create a nurturing business environment and to develop a vibrant entrepreneurship ecosystem that includes entrepreneurs, venture capitalists, scientists and researchers.This would serve as a magnet to attract top talent to Singapore.

I would like to take this opportunity to welcome you to connect to Asia via Singapore. My team and I will gladly help facilitate the process.

Conclusion

As a city-state, Singapore’s strategy is to link up with other global players, big and small, in order to strengthen our overall competitive position.MNCs will always play an important role here. In fact, we must make Singapore their command and control base for the entire region.At the same time, however, we must build up entrepreneurship so that we are also their partners, not just their employees.

This is an important challenge for Singapore in the next phase of our economic development.We need more local entrepreneurship in all sectors, not just in traditional areas like trading, real estate and banking, but also in new areas like high-tech manufacturing, creative services, Internet and e-commerce.The SME sector is our nursery to produce world-class local entrepreneurs.Some will fail but others will succeed.

We will continue publicizing the success stories of young Singaporeans entrepreneurs so that they become models for others to follow.The Government can play its role in the end, we need individuals to take up the challenge, and I believe that many will.

I hope that today’s peek into some of Singapore’s efforts in promoting entrepreneurship will inspire all of you.

Thank you.