Low Thia Khiang: Access to good mentors key to helping entrepreneurs succeed

While financing is important, access to good mentors is equally key to help these entrepreneurs succeed. Are there sufficiently experienced mentors available to advise our entrepreneurs? If not, are there plans to invite successful business founders or venture capitalists from places like the Silicon Valley to provide sound advice to these start-ups and evaluate their business plans?

This was a speech in Parliament on 8 March 2010 by MP for Hougang, Low Thia Khiang, during the Committee of Supply debate, on the budget for the Ministry of Trade and Industry (MTI). Read other Workers’ Party speeches and statements at wp.sg.

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The ESC and the Budget seem to focus heavily on helping companies which are already successful to become Globally Competitive Companies.
In its drive to identify and assist these promising medium-sized companies, has the Government forgotten about local small businesses like sundry shops and car workshops? Would such small enterprises have a place in the new economic landscape, or will they be crowded out or gobbled up by bigger fish?
What is the Government doing to help local small businesses, especially those in sunset industries, to become more competitive and viable in the new economy?
Secondly, is the Government providing the right environment and support for entrepreneurship to flourish in Singapore? We must not lose the spirit of enterprise in Singapore, keeping in mind that many global companies today started from very humble beginnings.
Last year, a survey of 2,300 students from local universities and polytechnics found that less than 2 in 10 of them considered starting their own businesses after graduating, compared to almost 7 in 10 who planned to take up salaried jobs. Is the Minister concerned that so few of our brightest students aspire to be entrepreneurs? Are our schools helping their students to develop more of the traits necessary to be successful entrepreneurs? For example, risk-taking, initiative and agility.
I understand that SPRING Singapore has a number of schemes that provide funding to start-ups. Can the Minister provide an update on how effective these schemes have been in nurturing successful entrepreneurs?
While financing is important, access to good mentors is equally key to help these entrepreneurs succeed. Are there sufficiently experienced mentors available to advise our entrepreneurs? If not, are there plans to invite successful business founders or venture capitalists from places like the Silicon Valley to provide sound advice to these start-ups and evaluate their business plans?

The ESC and the Budget seem to focus heavily on helping companies which are already successful to become Globally Competitive Companies.

In its drive to identify and assist these promising medium-sized companies, has the Government forgotten about local small businesses like sundry shops and car workshops? Would such small enterprises have a place in the new economic landscape, or will they be crowded out or gobbled up by bigger fish?

What is the Government doing to help local small businesses, especially those in sunset industries, to become more competitive and viable in the new economy?

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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.

ESC

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.

Conclusion

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.