VENTURE CAPITAL SCHEME

Mr Low Thia Khiang asked the Minister for Trade and Industry how many local companies have benefitted from the Venture Capital Scheme since the scheme was implemented; and whether there are plans to expand the scheme.

Mr S. Dhanabalan: The EDB Venture Capital (VC) Scheme was introduced in 1985. The objective was to pool together the financial resources from the private sector businesses and individuals, and channel them to start up technology-based companies and expand promising local companies. To-date, the EDB VC programme has invested in 21 Singapore companies (S$12.6 million) and three Singapore VC funds (S$16 million). More importantly, the EDB VC Scheme has led the way to the growth of a substantial VC industry in Singapore.

Singapore Companies in the VC Programme

There are now 21 VC fund management groups and more than 27 active corporate investors managing about S$2.6 billion between them. As at 30th September 1993, 142 Singapore companies received VC funding, of which, 14 companies are public-listed with an aggregate market capitalisation of S$3.4 billion and 28 are Singapore-based, seed or early stage projects.

Further Incentives to Promote Venture Capital

The Pioneer Service Status and the VC Incentive were introduced in 1986 to provide tax exemption for VC funds and to enable capital losses in VC to be offset against taxable income. The Pioneer Service Status require a percentage of the funds to be invested in start-up projects in Singapore. Todate, 14 VC funds have been awarded Pioneer Service status. The VC Incentive has been awarded to 19 companies of which five are for Singapore projects.

In 1992, the training of VC fund management professionals was included for funding under the Initiative in new Technology (INTECH) Scheme. One award has since been given.

Earlier this year, the tax incentives for VC were further enhanced. A new incentive was introduced under Section 13H of the Income Tax Act. It allowed VC companies with approved investments having linkages with Singapore to enjoy tax exemption for gains from the sale of their investments, dividend income from overseas investments and interest income from overseas convertible loan stock. The VC incentive under the Economic Expansion Incentives (Relief from Income Tax) Act was also amended recently to relieve the investor the burden of having to set up a separate holding company for each VC investment.

Further Expansion of Scheme

EDB is discussing with several fund management groups on the establishment of new VC funds totalling some S$200 million. In addition to fund availability, VC investors will bring with them their network of contacts, knowledge of industry trends and professional management expertise including advice on business strategies and financial matters. With the formation of more new VC funds and the success of an increasing number of VC-based local companies, we can expect more and more Singapore companies to accept VC funding for their growth.