BY CHEN HUIFEN

GOING by the rising number of start-ups formed each year, Singapore is on the right track with its entrepreneurship promotion drive, but more needs to be done to track these start-ups and ensure the number of successful companies that emerge out of them continues to grow in proportion to the size of the economy.

This is the view of Minister-in-Charge of Entrepreneurship, Lee Yi Shyan, who spoke to BT at length about his thoughts on developing entrepreneurship.

'I think we have moved the entrepreneurship scene along,' he said. 'If you look at the formation of new firms, for every 10,000 people in 1987, we had 45 new firms - that is, the number of start-ups formed. In 1997 we had 85. And in 2007 we had 108. So between 1997 and 2007 we have seen a very significant increase.'

Mr Lee, who is also Minister of State for Manpower and Trade and Industry, has set a target - to raise the number of new firms formed per 10,000 people to 120-130 within 10 years.

Still, he admits that statistics do not tell the full story, save the growing willingness of people to start a business. A more holistic system is needed to track start-ups through their development, he believes.

'Our data capturing system in Singapore has so far been geared towards traditional businesses and does not quite monitor the growth-stage companies,' he said. 'I think what we are interested in here is to look at how new firms are born and how they do in the first 12 months, 24 months and five years.

'To do that, we would need to have some kind of tagging and tracking system. It's like you give someone a GPS so that wherever he goes, whatever he does, we would know. We almost need to have that kind of system to be in place, to see how companies grow and what they need along the way.'

Government agencies and universities here are working to devise some form of a matrix to track entrepreneurship in areas Mr Lee mentioned. But the matrix will take some time to develop, given the complexity involved.

Meanwhile, the government will continue to provide the 'nutrients and oxygen' for vibrant enterprise environment.

Using the analogy of bread-making, Mr Lee said: 'For the dough to rise, you need to have yeast. And yeast, you have to give it oxygen, you have to give it sugar. Then it creates the carbon dioxide to help blow up the bread, so to speak.

'So the oxygen would be like government policy. The yeast will be entrepreneurs themselves. The sugar is the market. You need to link the entrepreneurs (yeast) to the market (sugar) so they can tap on the market to grow.'

Besides providing tangible assistance through a proliferation of financial schemes to help start-ups and small businesses, the government has made concerted efforts in 'soft' areas such as making Singapore more business-friendly. The Pro-Enterprise Panel set up in 2000 has received 2,000 suggestions on cutting red tape in public sector, and changes have been implemented in relation to half of these.

A minister in charge of entrepreneurship was appointed in 2003 and the Action Community for Entrepreneurship (ACE) was set up. ACE ropes in public and private sector leaders, including entrepreneurs, to improve the entrepreneurial landscape in the areas of culture and education, financing, rules and internationalisation.

As with yeast that can be cultured, entrepreneurship may be encouraged if given the right inspiration.

To this end, Spring Singapore already has schemes to expose young people to entrepreneurship and help them start their first business with seed capital. ACE has also been organising a speakers' circuit for entrepreneurs to share their personal experiences with young people.

'One of my visions is to have every student in the tertiary education system have the experience of starting and closing down a business,' Mr Lee said.

'So supposing in your four years' of university education, you have started a magazine company and closed it down, then you would know what it takes to raise funds, organise a team, to create a position for your product, to create distribution channels, to worry about collection, customer payment, credit.

'And then if you have the experience of closing down, you have to worry about creditors, your remaining financial obligations to whoever, your last payment to employees, your obligations to your customers who subscribed to your e-magazine or physical magazine.'

Mr Lee said such an experience would come in useful later, should the graduate, having worked as an employee for a number of years, find a niche in the market and decide to start a new venture. Having done this before, they would know the mistakes to avoid and the operational details to watch for.

'So if an engineer, an accountant, a lawyer, a doctor, an architect or someone in hospitality management can have that experience in their training, then what we have done is essentially equip people to overcome the first mental block of entering entrepreneurship,' Mr Lee said.

But supporting entrepreneurship and local companies will need to be complemented by a strategy of drawing multinationals. And this is not only for the substantial employment the latter provides. Multinationals serve as learning grounds and key access nodes to the global market.

'I think the HP (Hewlett-Packard) example in Silicon Valley is a good example,' Mr Lee said. 'HP has spun off many, many new start ups from its ex-employees. A number of ex-employees in HP Singapore have also started companies - in plastic injection, in contract manufacturing like Venture, the whole supporting industry. Because when you are working there, you say, hey I can do this thing.

'I know the system at HP, I can form a company. I can go to my boss now and say, 'Give me this contract, I'll get your cost down 20 per cent. We sign up for two years. It's good for you, it's good for me because I have a chance.' So this is how some of our SMEs actually started from multinationals.'

Growing a base of small companies and SMEs is important. But to add significant value to the economy, such firms need to be elevated to high-quality, high-growth types, either by addressing a fast-growing market, filling a niche in the market or creating a new industry altogether.

Quoting a study by Kauffman Foundation in the US, Mr Lee said that out of the 600,000 new firms formed in the US every year, about 1,000 of them go on to become high-growth firms. Aggregating the data over 100 years, these companies would account for about one percentage point of the 3 per cent GDP growth in the US.

'So in the case of Singapore, assuming the same ratio, then maybe 0.1 to 0.2 per cent (of the 160,000 enterprises) will be high growth, and if this high-growth can tap on the regional or world market, they are going to create a lot of wealth, jobs and spin-offs for the economy,' Mr Lee said.

He thinks Singapore is on its way to creating that critical mass of hi-growth firms. Each year, new local brands are emerging, the number of successful SMEs growing, and Singapore firms are increasingly making inroads to new markets overseas. And incubators at universities here are filled to the brim.

'So I would say, yes, we are getting there, but we need to continue,' Mr Lee said. 'I think our success would be defined by our ability to gain these proportionately to the size of the economy.'

This article was first published in The Business Times.