NURTURING OF ENTREPRENEURIAL BUSINESS ENVIRONMENT (Introduction of fiscal measures)

Mr Tay Beng Chuan asked the Minister for Finance (a) what kind of fiscal measures or policy changes the Government will introduce to nurture an entrepreneurial business environment in Singapore; and (b) what avenues are open to local enterprises to develop partnerships with Government-linked companies in order to capitalise on emerging opportunities in the region.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, a number of policy changes and programmes have already been implemented to nurture an entrepreneurial business environment in Singapore.

Our bankruptcy laws went through a major reform in 1995. One of the primary objectives of the new Bankruptcy Act was to encourage entrepreneurship, especially in cases where bankruptcy had arisen from misfortune rather than malpractice, by having a more liberal regime in bankruptcy discharges. With the liberalization, bankrupts are also encouraged to work towards an early discharge. The law was also amended to enable the Official Assignee to discharge more bankrupts by certificate. Further studies are currently being undertaken to determine if additional changes are necessary.

The Government has also appointed a Corporate Finance Committee under the Financial Sector Review Group, which is currently looking into ways to facilitate the listing of start-ups on the stock exchange. Details will be released in due course.

In addition, the Government has also been actively promoting the venture capital industry in the mid-1980s. As at the end of 1997, there was over $7.7 billion worth of venture capital funds managed in Singapore. Currently, these funds enjoy tax exemption on the gains from disposal of investments, and on certain investment incomes for a maximum of 10 years. To further encourage the growth of the venture capital industry, I have announced in this year's Budget Statement that the current 10-year limit will be extended, on a case-by-case basis, by up to a further five years, at a concessionary tax rate of not more than 10%. This will encourage venture capital funds to take a longer-term perspective of their investments and to minimize premature divestment.

The Government has also established a $50 million Technology Development Fund (TDF) which co-invests with private venture capital firms to fund early stage ventures. Other similar funds include the $100 million Technology Commercialization Fund and the $100 million Pharmaceutical and Biotechnology Growth Fund. EDB Investments Pte Ltd, a subsidiary of the Economic Development Board, also runs venture capital funds that invest in start-up companies at various stages of development.

As to the concern on the avenues open to local enterprises to develop partnerships with GLCs, I would like to point out that GLCs have been forming partnerships with smaller local enterprises for regional projects. However, the test is in the degree of complementarity between the specific needs of the GLCs and the capabilities of the SMEs. We should not force a pace beyond what commercial reality dictates.

The Government has also been facilitating the development of partnerships between the GLCs and smaller Singapore companies. An example is through the business interaction and networking made possible at Trade Development Board trade missions.

GLC/SME partnerships are already beginning to happen on the ground. For example, STIC, a GLC, has brought its core group of suppliers to Wuxi in China and paved the way for the latter to form business tie-ups with our suppliers there. Sembawang Shipyard has brought a number of local contractors to support their Karimun yard in Indonesia. Another example is PSA helping local companies bring their port-related innovations to overseas ports that PSA has invested in.