What’s missing from Economic Strategies Committee report

These are just a few proposals that could help SMEs and entrepreneurs in Singapore. I believe that growing our local private enterprises holds the key to our next phase of economic growth, which unfortunately the ESC has overlooked.

I read through all 53 pages of the much-awaited Economic Strategies Committee’s (ESC’s) main report, which is supposed to “chart the course for Singapore’s economic development over the next decade”. The report proposed ways of increasing productivity and expanding our international economic footprint. It then shifted gear to talk about how to make Singapore a more attractive destination that rich and internationally-mobile “talents” would want to call home. The report’s areas of study are summarised in the diagram below.


While I appreciate the work that the committee members (or rather, their secretariats) have put in, I felt that the recommendations were too skewed towards boosting high-end growth of large corporations, with insufficient emphasis on growing the sector that is in the best position to generate broad-based growth for Singaporeans — small and medium-sized enterprises (SME).

To be fair, the ESC did present a few proposals for growing SMEs:

1. Develop stronger alliances between large and small players to promote technology transfer, test-bedding and commercialisation. Provide incentives for MNCs to co-develop innovative products and services with SMEs, helping Singapore-based companies build credible track records, enhance innovation and accumulate knowledge capital.

2. Catalyse the supply of growth capital for growth-oriented SMEs based in Singapore, through seeding public-private co-investment funds.

3. Enhance access to human capital for SMEs, which usually face more difficulties in attracting and retaining talent, through broadening the scope of internship programmes and facilitating a ready network of mentors to provide strategic and expert advice.

I think the ESC’s proposals for helping SMEs are too peripheral and are hardly enough to generate much growth in our domestic private sector. Without significant growth in our SMEs, we will continue to be at the absolute mercy of the winds of the global economy, as this last recession has demonstrated.

SMEs as a key engine of growth

Singapore cannot continue to depend so heavily on manufacturing exports and foreign MNCs to power our economy, when many MNCs are making plans to relocate to cheaper locations. We need to develop new engines of growth that are sustainable and benefit ordinary Singaporeans, not just foreigners and rich elites. The domestic private sector could form this new growth engine.

To achieve broad-based growth, it is critical that we help local enterprises prosper. This will not only benefit the national economy, but countless individual Singaporeans as well. SMEs make up 99 per cent of business establishments in Singapore and employ 56 per cent of all workers here. Many of those with lower paper qualifications are only able to find work in SMEs, as they do not possess the skills that many MNCs demand. SMEs tend to cater more to local consumers and businesses, and so are less likely to shut down and move to lower cost countries — taking all their jobs, intellectual property and technical know-how with them — when economic winds shift.

While SMEs employ 56 per cent of the workforce, they contribute only 42 per cent of Singapore’s GDP. Their comparatively lower output is due to many factors, including a lack of economies of scale, international connections to market their goods, access to financing and a shortage of talented workers willing to work for them instead of MNCs.

So far, the government’s efforts to specifically help SMEs have focused on training programmes for SME managers and the grooming of a few SMEs which are deemed to have the potential to become home-grown MNCs. The result is that a few enterprises receive a disproportionate amount of funding and assistance from the government, while those that really need the help get very little.

The government should dispense of its habit of “picking winners”. Instead, more effort should be put into attracting venture capital (VC) funds to our shores. These private sector investors can provide a greater amount of funding that start ups need to bring their ideas to market. VCs are more in touch with the market than civil servants are, so they are in a better position to assess the investment potential of start ups. Also, the risk of failure is spread out among many VC firms. So even if one VC makes a wrong investment, the fallout will be more limited than if a government agency makes a huge bet on an industry which ends up in utter failure.

Developing an entrepreneurial culture

Entrepreneurship is the bedrock of SMEs. Without entrepreneurs starting small businesses, there would be no SMEs to speak of. Thus, increasing the number of entrepreneurs and their success rate will directly contribute to the growth of SMEs.

The government has a few training programmes to support entrepreneurs. However training alone will not help Singapore reach the tipping point of entrepreneurship. For this to happen, a culture of entrepreneurship needs to be developed among not just working adults, but has to start from young with students and their parents.

The entrepreneurial culture in Singapore is weak, especially when compared to other developed economies like Taiwan, Korea and the US. The recent Global University Entrepreneurial Spirit Students survey (GUESS) of 2,300 students from local tertiary institutions found that only 18 per cent of them intended to start their own businesses after graduating. In contrast, a whopping 69 per cent planned to take up salaried jobs.

We need a mindset shift in our society regarding what constitutes career success. Our current education system is too geared towards preparing students to be good employees, not entrepreneurs. Most local students strive to ace their exams so they can get into good universities and land a stable, well-paying job working for some large firm or the government.

Entrepreneurs require a very different skill set from salaried workers. A business owner needs to do a lot of selling and marketing of one’s goods or services. This takes a lot of innovation, confidence and humility — all skills which our schools have not adequately prepared our young for.

The stigma of failure in our culture needs to be changed. There needs to be a greater tolerance for those who stumble while trying. A lot of the “afraid to fail” mindset originates from our education system, where examination results define a student’s success or failure.

Schools should see it as their mission to nurture future business owners, not just salaried workers. They should start teaching the basics of running a business, like managing cash flow and selling, early in secondary school. Our young should be brought up with the mindset that the brightest and most capable students start their own company after graduating (or more likely the other way around), rather than win government scholarships or work in MNCs.

Parents often frown on their children taking the entrepreneurial path, as it is seen as more risky and less likely to guarantee financial success. To counter this, schools could consider tying up with business associations to conduct seminars for the parents, to explain the motivations behind what their children are learning, so that parents too can catch the vision about entrepreneurship and encourage their children to pursue that as a career.


These are just a few proposals that could help SMEs and entrepreneurs in Singapore. I believe that growing our local private enterprises holds the key to our next phase of economic growth, which unfortunately I feel the ESC has overlooked.

Author: Gerald Giam

Gerald Giam is the Member of Parliament for Aljunied GRC. He is a member of the Workers' Party of Singapore. The opinions expressed on this page are his alone.

30 thoughts on “What’s missing from Economic Strategies Committee report”

  1. Bro. You forgot Prof Linda Lim’s analysis and recommendation. Perhaps rather than let the government take the lead, the SMEs being entrepreneurial should carve out a niche themselves.

    I am skeptical if the government is able to help Singapore in any way to generate a more entrepreneurial culture.

  2. Gerald,

    Bootstrapping an effective entrepreneurial culture in Singapore will require a greater change than the PAP are willing to tolerate. In particular, the educational system would need to be essentially scrapped and rebuilt so that, when encountering a novel or unknown situation or concept, a graduate would be inclined and able to discover and evaluate information and formulate plans for himself or herself, rather than waiting for instruction from higher authority. Were that to happen, it would pose the greatest threat to continued PAP dominance in Singaporean history — the precise reason why the “education” system is in its current state to begin with.

    Short version: barring a change in Government, it can’t happen. And everything in Singapore is purposefully designed to ensure that a change in Government can’t happen. Therefore, we’re screwed. QED.

  3. My reading:

    We started from an economic model that heavily relied on FDI. This was right to start with. A great planner like late Mr. Albert Winsemius who contributed mostly to this plan HAS TO BE acknowledged. And also, please mind my word, he did it purely for goodwill, not for power, money or status. (In contrast, …….)

    However, he clearly indicated in his plan that more homework should be done to encourage local companies to quickly learn and leverage. This homework WAS NOT properly done.

    As for today, it is clearly shown that we still have this mindset that is to depend much on foreign large companies (MNCs) or local monopoly giant (…). Though from administrative point of view, this is a desirable setting, because it is easy to administer, but from survival point of view, it may not serve the purpose very well.

    IF the administrator true concern is for a better future, than we have plenty of homework to quickly change our system to accommodate SMEs.

    The last two years are clear example of how and why SMEs are important. I believe a balance of SMEs, MNCs and GLCs are a better approach. As a layman like me, what I know is that MNCs can come and go at any point of time. While true SMEs will try his/her way to survive in any condition. No comment for GLCs.

    Until today, lip services are great with regards to encouraging SMEs. But hand and brain services are poor. I personally almost lost hope with regards to this matter, not lost hope for a better future, but lost hope to the current administration (please be mindful that I only write ‘administration’ instead of G word).

    Also, I have to point out that we HAVE NO problem with manpower with regards to this entrepreneurship. The fact plenty of us can do it successfully overseas, but not here, shows something is really wrong here. I dare not point what, who, or when, but in general, it is almost a common knowledge now that this is due to some strong ideas that, well, still has to be there.

  4. Mr G,

    Your ideas are good. Is it possible to make it formal and bring it in to proper channel and turn it on?

  5. I notice there was not a single mention on growing the online economy.

    Why? If a group of gamers such as the brotherhood can grow an online economy. If the cummulative value of currency traded in both Norrath and Everquest is equal to the entire GDP of Greece. Then can someone please tell me why did the ESC not see this as a new area for growth?

  6. The minister’s pay is tied to the highest paid people in Singapore. It is quite natural that they would give priority to those at the top since every extra dollar these top people earned will be translated into minister’s pay accordingly. Helping those at the bottom or in the middle would be just a waste of resources as far as they are concerned.

  7. “Schools should see it as their mission to nurture future business owners, not just salaried workers. They should start teaching the basics of running a business, like managing cash flow and selling, early in secondary school.”

    Gerald, you should spend some weekend mornings watching children program… channel 8, ape thinks. There was a period when primary school children were exposed to entrepreneurship. Two groups of children from different schools would compete for the higher sales. In each episode, the teams were assigned with a particular product, such as handmade flowers, cookies… generally simple stuff. They would learn how to brand and market their product, set price and conduct sales.

    Ape thinks schools are doing it but not quite sure how structured or intensive are they doing. Not too intensive, ape hopes, to the extent are areas of development are compromised… not everyone are cut out for entrepreneurship, you know?

  8. Let’s look at the main cost component of a business. These are mainly manpower cost, rental of premises and utilities charges. The high cost of rental resulting from governmental land pricing policy using ‘reserve price’ has created an inflexible market pricing model. We have allowed Singapore to become a nation of landlord rather than a nation where SME can strive to support economy. With SME having to pay a fixed high premium in rentals, the only way to stay afloat is to cut the other costs that is significant. This has got to be replacing the local manpower with cheaper manpower or some sort of mechanisation.

    If you were to look at the foodcourt business, individuals food stall owners are making money just to pay high rentals. The owner would either do the work themselves or employ foreigners to help them stay afloat. The high rentals is the result of the ‘over the top’ high price that landlord bidded to secure the ownership because of the reserve land price policy instituted by goverment. These high cost at a tender stage will cascade down to the high cost of doing business in Sg. So how high is high? If businesses need to pay 30% or more of its revenue to pay rent then this is deemed excessive unless this is a super luxury services where the clientele are super rich.

    The land cost is the apex of all other cost as businesses need space. If a high percentage of business cost is fixed (cost arising from most rentals of premises are fixed cost), then in difficult times business is more likely to fail as it is not able to respond with a high fixed cost structure. Land cost contribute significantly to the fixed cost of all businesses either directly through long term leases or rental and indirectly through other service cost eg utilities etc.

    SG Gov should seriously review how to reduce overall cost other than manpower or manpower productivity intiaitives. Do we want to become just a nation of landlord, collecting high rentals from tenant or do we want to build SME to significantly support the economy. Need to go back to 101 economics for overall cost reduction

  9. Shandong Peanuts,

    Glad to listen from you. I believe you have solid background and experience in F&B or retail. Your points are valid.

    From a friend of mine, illustrating about his/her SME business here from 20, 10, 5, and 2 years ago. It was a F&B line. Showing how his/her rental cost (as an percentage of revenue) grows unnecessarily high to me, he asked for opinion. Well, I told him/her to carefully considering if that is what he/she want. In essence, he/she was taken ‘hostage’ by unfair practices that utilize the fact that he/she has done so well and gain customer confidence. His/her landlord was in the opinion that he/she has NO choice but to continue at that location (otherwise he/she has to start all over again). Thus landlord unnecessarily increase rent without proper reasoning. (To certain extent, please compare this mindset with our highest administrator).

    BUT, the outcome is that he/she called it a stop. Until now, the same premises has changed operator (people who wanted to try their luck) several times in a short time span. One thing that I need to note here, the landlord actually lost in long term perspective.

    Mr G, you may want to look into this as an example of how different approach may promise more fair and better outcome to most people. Thanks.

  10. Productivity: 3-in-1 Formula

    They say:
    At office upstairs,
    3 men in same job,
    one in prime,
    another is senior,
    plus one mentor.

    So, ESC said productivity?
    Sure, it is our aspiration.

  11. Productivity: 3-in-1 Formula

    3-in-1, but NOT a price of one though.
    So did you say productivity?
    Sure, very productive.

  12. The proposals should have been made a decade ago.
    Now only when usa kenna big trouble into trillions of debt that such proposals are made would mean it would that a long time to see success, if any.

    Plans take time to implement and if these come so late.
    USA is surely not gonna be able to be what it used to be for a long time to come. The Reliance on them has always been so great. I think these proposals are a bit too REACTIVE than proactive.

    I am very disappointed. I expect Non-Mediocre.

    I think Gerald can do just as good a job if not better.

    What singapore needed and needs is Creative resources. This mandates a conducive environment. Singaporeans can hardly be characterised as innovative, inventive and creative. To be fair, there are always a creative people in any part of the world. But singapore seems to be lacking these.

    People dare not talk or discuss too much. They have learnt Self-Censorship. This is one of the best ways to stifle the brain. Remember, we live in a world of 195 countries at least where globalization and severe dependence on export means we stand on very loose grounds if population’s creativity is stifled. How to compete with the world with no natural resources? The reliance on Human Capital means Creativity is utmost important.

    dont be reactive. be proactive.
    I expect nothing less.

  13. To quote from RedBean: “No criminals in our casinos”


    Casino = Cash + Sin + O (people)

    It comes as a package. At the end of the day, all other industries that supports and relies on it will be formed. And we as a nation will depend on them (starting from projected 1% GDP contribution, and by design, to grow exponentially further up).

    To start with, it is the objective of current administrator to ensure BOTH casinos are successful. And this is exactly the conflict of interest with national interest. Because when both casinos are successful, it means our future is compromised.

    My opinion is that at about 10 years down the road, collectively we WILL REGRET about this casino decision (mark the date 6 Feb 2010). At that time, we WILL HAVE NO CHOICE BUT TO ACCEPT the consequences of this decision. Most positive consequences will be at the early stage and in short term only. BUT REAL NEGATIVE CONSEQUENCES will last forever !!!

    From this view, the very person who sign on the dot to allow our future to be compromised is a true criminal by definition. And to allow and support this from happening, current administration HAS TO ANSWER to Singapore History for taking an easy way out without solving the real economic structural issues.

  14. Oh… I forgot to mention… he mentioned Singapore and LKY around the 15 min mark in the video.

  15. One of the big things of the ESC report was to go underground. Guess you ought to be proud of your government and yourselves if you live in an apartment at Hell Level Basement-18! When enough Singaporeans are driven down to the hell levels, more properties on the surface of the earth can be relinquished to accommodate still more foreigners. With the help of this report, I am convinced that Singapore can achieved the 6.5 million “optimum” population target set by our beloved government! The productivity should also improve automatically since we can work no day no night underground – anyone dares to think otherwise may risk having their air turned off!

  16. An Old Friend,

    Great speech by Mr D. Thanks.
    By the way, based on points from that book, what is your view to Sing’s nation building?

  17. In this case, I’ll say-


    which means “one who does not hold an office does not discuss its policies”, or so I think. Better translation welcomed.

    It contradicts the fact that I’m here and posting…. and that’s not to say it’s not by business… it’s my country so it hurts if things fail.

    It’s just that in this case, I know too little, and my understanding too shallow… so it’s unfair for me to comment. The same goes with climate change where the science eludes me so I won’t be in a hurry to comment if we ever go there…

    But that’s not to say concerned citizens should not discuss the ESC report. It’s just me…

  18. An Old Friend: You are a wise person who is too humble.

    But I beg to differ, in terms of mindset. In a small country like Sg, Israel, etc, every single brain and soul counts. Irregardless their profession, religion and background.

    We are taught about delegating all our trust to a certain group of people (almost to the extend of 99%). This is valid in the past, but not now and not in the future. It is the collective responsibility to ensure that this trust is based on fact, meritocracy, and proper accountability. Both in terms of past action, current result, and policies for future. Because it is the most fundamental pillar for us to survive.

  19. Old Friend – Thanks for the link. I watched the whole video. It was very enlightening. Seems like culture is the main driver of successful entrepeneurship.

    Thanks everyone for your comments.

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