SUPPORT PROGRAMMES FOR THE SELF-EMPLOYED AND SMES

SUPPORT PROGRAMMES FOR THE SELF-EMPLOYED AND SMES: 1.

Mdm Ho Geok Choo asked the Minister for Trade and Industry in view of this year's global financial fallout (a) whether a shift towards self-employment, sub-contracting and consulting is likely to accelerate and, if so, what type of support programmes will be rendered to these groups; and (b) whether small businesses and start-ups can become sizeable enough to be a pillar of our economy and, if so, what kind of support programmes are available to the SMEs and the start-ups in this economic downturn.

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The Minister of State for Trade and Industry (Mr Lee Yi Shyan) (for the Minister for Trade and Industry): Sir, our unemployment rate was 2.2% in the 3rd quarter of 2008, up from 1.7% during the same period in 2007. The unemployment rate is likely to deteriorate further as the global economy worsens.

Historically, we are unable to establish a clear relationship between the level of self-employment and economic conditions. The proportion of self-employment in our economy increased in the 1997 Asian Financial Crisis but came down during the dotcom bubble burst in 2001. Self-employed individuals, especially entrepreneurs, who leave the employment sector to incorporate new businesses, however, can become an important source of growth for the economy. The number of start-ups in Singapore has grown steadily over the years. Start-up companies, defined as companies employing at least one employee and less than five years old, have increased from 27,000 in 2002 to more than 36,000 today. They now employ more than 300,000 workers and generate more than $166 billion in turnover.

The process of starting up business in Singapore is simple, fast and costs little. Incorporating a new company used to cost more than $1,000 and take five days. Now with our one-stop BizFile e-services, incorporating a company costs only $300 and takes a mere 15 minutes. Starting a business is even cheaper at a cost of $65. One can also seamlessly access comprehensive information on business licences, regulations and Government support from the integrated online portal – EnterpriseOne.

Our start-up companies enjoy a conducive tax environment. They do not need to pay tax on the first $100,000 of annual income for the first three years of their operation. On the next $200,000 of annual income, they only need to pay half

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the amount of tax. In addition, technology start-ups also enjoy special tax incentives for R&D investments.

Adopting a public-private-partnership approach to promote entrepreneurship, we have vastly improved the business environment over the years to render it conducive for entrepreneurship and new firms formation. Our support for start-ups is elaborate and wide-ranging and we have designed measures especially to assist start-ups at different stages of their growth. For instance, start-ups less than three years old with less than $500,000 paid-up capital can apply for start-up capital of up to $1 million under SPRING's Start-up Enterprise Development Scheme, or SEEDS in short. Start-ups can also apply for capital of up to $1.5 million under the Business Angels Scheme. While some start-ups are open to receiving equity from Business Angels or venture capitals, others might prefer to finance their operations from loans. For this latter group of companies, they can access loans of up to $100,000 from SPRING's Micro-Loan Programme to supplement their working capital.

In exploring the best financing solutions and growth models, some start-up SMEs might prefer to consult experts face-to-face. To facilitate this process, SPRING, in partnership with the private sector, has established a network of Enterprise Development Centres, or EDCs, to provide free consultation services. The five EDCs are conveniently located at the Chinese, Indian and Malay Chambers of Commerce, Association of Small to Medium Enterprises and Singapore Manufacturers' Federation to serve their members and start-ups at large.

Mdm Ho also asked whether our small businesses and start-ups can be a sizeable part of our economy. Our SMEs and start-ups are already a significant part of our economy. They make up of nearly half of our overall GDP, contributing to

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62% of our total employment. In fact, the growth of our SMEs has outpaced that of the overall economy in certain years.

Our SMEs, be they start-ups, small businesses or existing firms, can tap on a wide range of support measures to strengthen their capability in finance, operation, product development and manpower training. To ensure continued access to capital and credit, SPRING has recently enhanced the Local Enterprise Financing Scheme and also the Micro-Loan Programme by increasing Government's risk-taking from 50% to 80%, widening eligibility to all local enterprises, increasing loan quantums and reducing interest rates by 1.25%. We also introduced a new Bridging Loan Programme which offers up to $500,000 to address SMEs' working capital needs.

To help our SMEs develop their capabilities, there are also a wide range of grants that support areas such as branding, equipment upgrading, IT development and manpower training needs. SMEs can also tap on the recently introduced SPUR programme to retrain and upskill their workers. Through IE Singapore, we also help our SMEs go abroad through internationalisation initiatives such as trade missions and export assistance. SMEs can refer to the EnterpriseOne website to learn more about the 22 programmes SPRING has for them and the 13 programmes IE Singapore has for them for overseas expansion.

Sir, we are not standing still. We are continually exploring further measures to help our SMEs seize new opportunities so that they can weather this economic storm, remain competitive for the long term and emerge stronger, and more resilient.

Mdm Ho Geok Choo (West Coast): Thank you, Minister of State, for the very comprehensive explanation. Just on two

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points. The first point really has got to do with the part about being able to go face-to-face with the consultants that are in place now for start-ups as well as even self-employed individuals to consult with. I am just wondering whether the Minister of State would be able to enlighten the House as to how well this outreach has been accepted by the industry, in terms of the numbers of start-ups as well as individuals who have taken up this service that is available. The second point really is that beyond consultancy which is normally at the initial stage, is there any plan for an advisory service of sorts where actually the consultants will walk through with the new start-ups as well as the newly self-employed people in the process?

Mr Lee Yi Shyan: Let me answer the second question first. I think Mdm Ho is referring to the professionals and some of the PMETs who might leave the employment sector and go into the business. Many of them have good experiences and good skills. But it really depends on the kind of sector they are going in, they would certainly have to be associated with their professional bodies in order to be more effective in providing the services. For instance, the Institute of Management Consultants, working with SPRING, over the years, has come up with accreditation programme to certify consultants of certain minimum skills. So if the professionals wanting to go into this sector to be consultants, then they too have to learn new skills, in terms of consulting methodology as well as to run a business at the same time. So SPRING's approach has been to work with different professional bodies to raise the standard of their professionalism and, therefore, making them better receptacles and to serve their members at large.

On the first point on face-to-face consultation, over the years, with the formation of EDCs as well as our agencies own centres to provide face-to-face

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consultations to companies that are interested, I think the response has been good. The basic knowledge and information needed to start a business and to discuss the growth operation models of a company or a business can be discussed in the initial period. But we should also understand that helping companies to grow over a sustained period of time is both experience and time-intensive. Therefore, beyond these five centres, we also encourage the network of mentorship to be formed. So, in the overall scheme of things, when we want to promote healthy start-ups and new firms formation in Singapore, we have to strengthen the network of mentorship and we encourage experienced mentors with background of investments and business operations to participate in this network.