Supporting SMEs During the Economic Crisis: Issues & Challenges The Singapore Experience Mr Inderjit Singh

1. Supporting SMEs During theEconomic Crisis: Issues & Challenges The Singapore Experience Mr Inderjit Singh Deputy Chairman, Action Community for Entrepreneurship Member of Parliament Singapore and CEO Infiniti Solutions CACCI Conference, Yokohama, 1 June 09

2. Agenda • Role of Entrepreneurship - Singapore • Overview of Enterprise Development Framework • Economic Crisis & Government’s Initiatives • SMEs Seizing Opportunities and Building for Growth • Conclusion

3. Role of Entrepreneurship - Singapore

4. 1965 – 1978: Export Oriented Industrialisation 1979 – 1985: Industrial Restructuring 1998 onwards: Transforming to Knowledge-Based Economy 1986 – 1997: Capability Building and Economic Diversification Phases of Economic Development

5. Phases of Economic Development • Singapore’s Economy • Our core strengths: • Geographical position • Apt Infrastructure • Integrated communications system • Political stability • Educated workforce • Economic Development • Reinforce position as an entreport • Foray into banking, finance & high value-added sectors

6. Entrepreneurship Promotion • Economic Review (2002) • Twin Engines of Growth • High value-added manufacturing & emerging technologies • Exportable services, e.g. financial, education, healthcare, creative industries • Propelling Entrepreneurship • Foster spirit of entrepreneurship & creativity • Encouraging growth of enterprising startups • Appointment of Minister in charge of Entrepreneurship • Formation of Action Community for Entrepreneurship

7. Contribution of SMEs 99% of all enterprises are SMEs… Large Enterprises 972 (0.6%) …they employ 62% of the workforce… SMEs 161,000 (99.4%) Large Enterprises 1.03 mil (37.8%) SMEs 1.7 mil (62.2%) No of Enterprises No of Employed Persons …and contribute 48% of Total Value Added Large Enterprises $118 bil (52.5%) • SMEs are defined as: • Manufacturing enterprises with net fixed assets investment less than S$15m • Services enterprises with less than 200 employed persons SMEs $107 bil (47.5%) Share of GDP

8. Agenda • Role of of Entrepreneurship - Singapore • Overview of Enterprise Development Framework • Economic Crisis & Government Initiatives • SMEs Seizing Opportunities and Building for Growth • Conclusion

9. SPRING Singapore – the Enterprise Development Agency Promote enterprise development and standards & accreditation 1. Promote industry development and foreign investment attraction 2. 1. Promote international trade and internationalisation of Singapore-based enterprises 3. Ensure supply of industrial facilities and industrial space 4. 5. Develop Singapore’s research capabilities. Promote and develop tourism industry 6. Promote a competitive and reliable energy industry 7. Develop and promote Sentosa Island 8. Regulate anti-competitive activities 9. Develop & manage a national statistical information system 10.

10. Overview - Enterprise Development • A Competitive SME Sector • Dynamic and Innovative Global Enterprises Large Companies (~1,000) $50m Grow Innovative GOEs Money Management Small & Medium Enterprises (SMEs) (~33,000) Develop Key Clusters $1m Market Know-How Seed & Nurture Innovative Startups Micro Enterprises (~128,000) Develop an Environment for Enterprise Growth In partnership with Chambers & Associations, Government Agencies & IHLs

11. Since 2003, ACE has collaborated with various partners as a change agent to build a more pro-enterprise environment Chairman Minister Lee Yi Shyan • Deputy ChairmanInderjit Singh Culture & Education Changing culture & mindset Rules Facilitating discussion on regulations Internationalization Facilitating networking & learning Financing Improve access to financing ACE - Promoting Entrepreneurship

12. Achievements - Culture & Education • Entrepreneurial Talent Development Fund • Seeded 60 student ventures since 2004 • BlueSky Exchange & Evening • Facilitated 4,000 participants to build networks, learn and share since 2003 • BlueSky Festival • Annual celebration of entrepreneurship • 21,000 participants since 2004 • July 10, 2009; speakers include co-founder of Baidu.com, and Kauffman Foundation representative • Global Entrepreneurship Week • 12,000 participants in 2008 Speakers’ Circuit 30,000 Students Enterprise Day 3,000 Students Reality TV Programmes 22,000 per episode

13. Achievements - Rules • Pro-Enterprise Ranking of Government Agencies • Ranks agencies’ responsiveness to businesses • Pro-Enterprise Panel • Over 900 regulations changed from 1,700 suggestions • First Mover Framework • To recognise and encourage innovative business ideas World’s Easiest Place to do business,2006 – 2008 (World Bank Survey)

14. Achievements - Finance • Deal Flow Connection • Match SMEs with potential investors and financiers through intermediaries • SME Loan Securitization • Serves SMEs with no collaterals / track record, or those internationalising • Over the Counter (OTC) Trading Platform • Amended Securities and Futures Act • Private companies to list their shares to raise up to S$5M Ranked 5th by US Milken Institute in Capital Access Index 2008

15. Achievements - Internationalisation • Mentoring Programme • 2-year pilot involving 23 mentors helping 6 companies internationalise • July 2007 – Launch of book “World Conquest in Progress: What happens when Singapore companies Internationalise”

16. Agenda • Role of of Entrepreneurship - Singapore • Overview of Enterprise Development Framework • Economic Crisis & Government’s Initiatives • SMEs Seizing Opportunities and Building for Growth • Conclusion

17. Onset of Global Economic Downturn

18. Economic Crisis - Singapore • Export oriented market • Total trade down 28% year-on-year in 1Q 2009 • GDP contraction, down 10.1% year-on-year in 1Q 2009Projected growth for 2009 -9% to -6% • Resident unemployment rate increased from 2.8% in Mar 2008 to 4.8% in Mar 2009, a five-year high • Decrease in consumers’ confidence & spending

19. Key Issues for SMEs • High Costs • - Crisis preceded by period of high inflation • - High rental and commodities costs • - Cashflow of SMEs affected • Excess Manpower • Lowered demand for goods/services • Rising need for streamlining manpower • Credit Crunch • - Reluctance of banks to lend

20. High Costs Credit Crunch Excess Manpower Government’s Response Strategies S$20.5b Resilience Package

21. Enhancing Business Cashflow and Competitiveness • Rental Costs: 40% Property Tax Rebate for landlords and 15% rental rebates by government landlords Jurong Town Council, Housing Development Board and Singapore Land Authority • 30% Road Tax Rebate for goods vehicles • Government fee freeze till Dec 2009 • Enhancement of loss carry-back relief system • Carry back qualifying tax losses for up to 3 years of assessment • Increase cap on deductions • To ease cashflow and expedite tax refunds

22. Stimulating Bank Lending • Launched S$2.3b loan facility for local companies through business financing scheme in Nov 2008 • Launched the Resilience Package including S$5.8b to stimulate bank lending in Jan 2009 • Main features: • - Raising government risk sharing of loan defaults from 50% to 80% or 90% • - Increasing loan quantum, e.g. Microloan from S$50,000 to S$100,000 Bridging loans of up to S$5m • Extending schemes to larger enterprises • beyond local SMEs

23. Stimulating Bank Lending – Outcome • Government-backed loans continue to rise • 1,800 approved loans at a total value of S$1.06b in Apr 09 • Total loan value now stands at S$2.5b (since Dec 2008) • Exceeding the total loan value over the past two years;S$1.03b in 2008 and S$682m in 2007 • SMEs are the main beneficiaries, accounting for 90% of these loans • ~70% of the loans have gone to small businesses with less than S$5m in annual sales turnover

24. Preserving Jobs • Jobs Credit Scheme • To encourage our businesses to preserve jobs in the downturn, companies get partial reimbursement of CPF (Provident Fund) costs, of up to S$300 per worker, if they keep the worker • SPUR or Skills Programme for Upgrading and Resilience • To encourage Singaporeans to upgrade their skills for employment or re-employment, companies get subsidies and absenteeism payroll for sending workers for courses

25. Agenda • Role of of Entrepreneurship - Singapore • Overview of Enterprise Development Framework • Economic Crisis & Government Initiatives • SMEs Seizing Opportunities and Building for Growth • Conclusion

26. Building for Growth • Singapore as Best Place to Start Business • Corporate income tax reduced to 17% from YA 2010 • Encourage investments in Innovation • S$200m test-bedding & S$180m Core Innovation Fund • Enhance Business Capability • S$200m BUILD (Business Upgrading Initiatives for Long-Term Development) package to enhance business capability • Positions SMEs for recovery • Grants up to 70% for business capability development programmes

27. Building for Growth • BUILD supports capability building both on the enterprise level and on an industry level • Examples of enterprise capabilities supported: • Technology Innovation • Intellectual property management • Branding • Business excellence • Management systems and processes

28. Agenda • Role of of Entrepreneurship - Singapore • Overview of Enterprise Development Framework • Economic Crisis & Government Initiatives • SMEs Seizing Opportunities and Building for Growth • Conclusion

29. Economic Downturn – When winners can arise

30. BYSI – Building for Growth

31. Greenpac – Charging Ahead

32. BreadTalk – Expanding Despite Downturn

33. Thank You