SINGAPORE'S ECONOMIC TRENDS

Mr Ong Kian Min asked the Minister for Trade and Industry, with reference to the recent US Embassy report on Singapore's economic trends and outlook for the third quarter, (a) how does Singapore compare with other countries in the area of new company formation; (b) what are the indicators to assess whether our progress to become a knowledge-based economy is on track; and (c) whether the measures which the Government has adopted so far to promote risk-taking ventures are effective in achieving the desired outcomes.

BG George Yong-Boon Yeo: The number of new companies formed has been rising since the Asian crisis. 2,800 new companies were formed in the third quarter last year compared with 1,600 in the third quarter of 1998. New companies formed in 1999 accounted for 7% of the total number of companies in Singapore. This compares well with the 7% in Hong Kong, and 5% in both Taiwan and Malaysia. (There are no data on new company formation available for other countries like the US and Japan).

We have many indicators to track our progress towards becoming a knowledge-based economy (KBE). These include quality of our work-force, expenditure on R&D, foreign direct investment inflows, number of patents, and usage of info-communications and technology (ICT) like internet and mobile phone penetration. While we have improved in many of these indicators, the transformation to a KBE is a long-term process that requires sustained effort.

To promote risk-taking ventures, the Government launched several initiatives to create a more conducive environment for technopreneurship development since 1999. These include new incentives to encourage venture investments, employee stock options for technology start-ups, relaxation of our bankruptcy regime, attraction of foreign talents, and the US$ 1 billion Technopreneurship Investment Fund.

These initiatives have borne initial fruits. A NSTB survey showed that the number of new technopreneurial companies formed has increased significantly, from under 100 companies in 1996 to more than 500 in 1999. There are now more venture capitalists (VC) and VC money in Singapore. Some 26 top-performing VC firms have set up in Singapore. A total of $1.4 billion was raised by VCs in Singapore in 1999, a 16% increase from 1998.

It is too early to gauge how well we have progressed. Many high-tech startups have been affected by the plunge in tech stock prices. This should not set us back as those with strong technology and sound business models will continue to thrive. They will become an important part of our economy in the future.