Keynote Address by Mr Peter Ong, Permanent Secretary for Finance and Chairman of the Accounting and Corporate Regulatory Authority, at the Start-Up Enterprise Conference01 Jun 2010
Ladies and Gentlemen,
1. Good morning. I am delighted to join you at this morning’s Fourth Start-up Enterprise Conference.
Optimistic outlook for new entrepreneurs
2. We are halfway through 2010, and the last six months has been marked by significant happenings. Just earlier this year, global economies were treading cautiously, making their way out of one of the worst economic crisis. Barely a few months later, the global economy is now facing a unique situation – while Asia and the emerging markets undergo a rebound from the crisis and the US witness gradual improvements in economic indicators, Europe is experiencing a major crisis due to Greece’s sovereign debt problems. There are fears that other European countries with significant government debt positions will worsen the situation and result in global contagion.
3. Notwithstanding the situation in Europe, the Singapore economy has emerged stronger from the recession a year ago, expanding by 15.5 per cent on a year-on-year basis in the first quarter of 2010. Companies are now more positive in their outlook and looking to seize opportunities to grow their businesses. Between January and May this year, some 11,500 local companies were incorporated – a 20 per cent increase from the 9,600 local companies set up in the same period in 2009.
4. Findings from the 2010 Start-up Enterprise Survey conducted by DP Information Group and the Action Community for Entrepreneurship (ACE) echo the positive sentiments, with 68% of those surveyed expressing greater confidence of being profitable in the next 12 months. Start-ups in the F&B sector are slightly more optimistic, with 72% indicating confidence in turning a profit in the upcoming year. Overall, new businesses maintained their profit levels in 2009 compared to 2008, despite the economic downturn.
A pro-enterprise environment to stoke passion for entrepreneurship
5. With its strong infrastructure, connectivity and pro-business environment, Singapore has been ranked by the World Bank as the easiest place to do business for four consecutive years. Improvements to the business registration regime have propelled Singapore from the 10th to the 4th position for the ease of starting a business in the 2010 World Bank survey. Building on a framework aimed at promoting and supporting entrepreneurship, ACRA has, over the years, rolled out various business-friendly initiatives including BizFile and Unique Entity Number that help to simplify and streamline business administration processes. Simplifications of business laws and the introduction of new business vehicles such as Limited Liability Partnerships and Limited Partnerships have contributed towards enhancing business activity.
6. The availability of timely business information plays a critical role for companies when it comes to making important business decisions. To enhance the way business information is disseminated to the business community, ACRA launched the Business Financials in XBRL (BizFinx) initiative in 2007 to streamline and transform the way public corporate financial data can be used to facilitate the decision-making process of the different stakeholders in the business community.
7. In January this year, Open Analytics, a financial analysis application was introduced as part of the BizFinx initiative. This private sector initiative provides the business community with interactive web-based access to the national corporate registry administered by ACRA. The Singapore Financials Direct - another private sector-developed application using XBRL data from financial returns lodged with ACRA, was launched last week to augment the existing XBRL content to benefit a wider community of users. The data allows entrepreneurs to identify untapped niche areas and business opportunities, while key decision makers and shareholders can use the expansive corporate financial information to review the performance of their companies against their peers.
The rise of the young entrepreneur
8. These pro-business initiatives have contributed to meeting the needs of a new breed of entrepreneurs – the young and educated, adept at new technology and able to easily leverage the internet as a business tool. Findings from the start-up enterprise survey have shown that an increasing number of start-ups are receptive to adopting technology, with 93% of start-ups now leveraging on the Internet as a business tool, and 58% having established a corporate website, as compared to 38% in 2007.
9. I am heartened to learn that findings from the Global University Entrepreneurial Spirit Students’ Survey Singapore 2008 released earlier this year, revealed that Singapore has one of the highest entrepreneurial intention rates among tertiary students worldwide. 81 per cent of the students surveyed expressed some form of interest in entrepreneurial activities. Two-thirds of the students who indicated an interest in entrepreneurship had already taken steps towards setting up their own businesses.
10. Take 2359 Media, a start-up formed in 2009 by two NUS graduates, Wong Hong Ting and Zhou Wenhan. The young entrepreneurs had initially developed SG Malls as an innovative new tool, and it went on to become one of the most popular downloaded applications from the iTunes applications store. Spurred by their success, they then established 2359 Media, a turnkey mobile publishing platform that enables content providers and advertisers to distribute content on Smartphone platforms. The start-up has launched its Malls applications in Sydney and Toronto, and is now planning launches in other global cities.
11. To pave the way for more young entrepreneurs to become real start-ups, the Government revised the minimum age to register a business entity or for a directorship in a company, from 21 to 18 years in March 2009, with encouraging results. Within a period of nine months, some 250 business entities were registered by young business owners between the ages of 18 to 20 years old.
Support framework for start-ups
12. To nurture the growth of SMEs, Singapore offers a very competitive tax regime designed to encourage new start-up companies. Under the full tax exemption scheme, a newly incorporated company that meets the qualifying conditions effectively pays only 5.6% on the first $300,000 of the income they earn in their first three years. After this period, start-ups can continue to pay less than 9% tax on the same amount, thereby allowing new entrepreneurs to retain a larger portion of their earnings to be ploughed back to grow their businesses.
13. This year, the Government has also unveiled an unprecedented tax benefit in the form of the Productivity and Innovation Credit, to encourage especially start-ups and SMEs to invest in productivity and innovation. As an illustration, for the first $300,000 that a start-up invests in staff training, it can deduct $750,000 from its taxable income. The same start-up will also enjoy another $750,000 deduction should it also invest in automation. The Productivity and Innovation Credit also allows businesses to convert the enhanced tax deduction into a cash payout, a move that would come in handy in helping start-ups and SMEs ease their cash flow.
14. For most new start-ups, the lack of funding often poses a stumbling block in maintaining sustainability and growth, with new entrepreneurs frequently tapping on their own savings or loans from family and friends for the initial set-up capital. While bank financing may be out of reach for many businesses with no collateral and track record, a variety of government funding schemes are available to assist business at the different stages, be it start-ups, those seeking to expand or those planning to internationalise.
15. Aspiring entrepreneurs can tap on financing resources such as SPRING’s YES! Startups programme, which provides young start-ups with grants of up to S$50,000 to start their innovative business, while the Start-Up Enterprise Scheme (SPRING SEEDS) provides co-financing option of up to $1 million in funding start-ups with innovative and viable content. Traditional business and non high-tech companies can look to the Enterprise Fund administered by IE Singapore, for funding of working capital, project financing or capital for expansion and internationalisation.
16. Beyond funding businesses directly, at this year’s Budget, the Government also announced the Tax Deduction for Angel Investors Scheme, to help attract funding and management expertise for new start-ups, by according angel investors with tax deductions on their investments into start-ups. SPRING will release more details on this scheme later this year.
Expanding beyond our shores
17. An encouraging sign is the number of start-ups venturing overseas. With Asia emerging as the driver of global economic growth, our strategic location offers a vantage point for entrepreneurs to tap the potential in these emerging markets, to develop their business into globally competitive enterprises. The ESC sub-committee on Developing a Vibrant SME Sector and Globally Competitive Local Companies found that Singapore’s small domestic market makes it necessary for homegrown enterprises to internationalise, often at a relatively early stage of their growth. And this is indeed what has been happening. Start-ups with overseas revenue have increased from 16% in 2008 to 25% in 2009, according to data from the 2010 Start-up Enterprise Survey. Findings have also shown that companies are more likely to achieve higher revenue and profitability in a shorter time when they grow their business overseas.
18. A strong support framework is in place to help local SMEs take their business to the global marketplace. In addition to IE Singapore’s existing Internationalisation Finance Scheme which helps companies secure financing for overseas expansion, the Government has rolled out a $10 million SME Market Access Programme (pronounced ‘MAP’) to provide funding for SMEs to grow their business overseas. The scheme paves the way for Singapore-based SMEs’ who are venturing overseas into new markets for the first time by supporting key market access costs via funding of up to a maximum of $100,000. The Government is also looking into various models of cross-border financing, to see how we can better meet the needs of internationalising companies.
19. Conversely, start-ups can also look to the home ground for opportunities, by tapping the increasing number of smaller global enterprises who are growing their base in Singapore. Local SMEs, armed with the advantage of cultural familiarity and market connectivity, could partner these global enterprises who are seeking new markets outside their home countries, to jumpstart their foray into the region.
20. Even as I have enumerated the many Government schemes to help businesses, I believe that the key to starting a successful enterprise lies ultimately with the entrepreneur who is able to seize available opportunities and meet the market’s needs in a unique and sustained way. The outlook for start-ups is certainly positive and encouraging, with the framework and support in place to nurture their growth. I encourage all of you to capitalise on the current robust business climate, and venture forth to seek out growth opportunities all around.
21. On this note, I wish all of you an informative and fruitful conference. Thank you.