You are here
Singapore Budget 2018: Developing, drawing unicorns to Singapore a possible growth strategy: SME panel
UNICORNS in Singapore may not be so mythical after all, if the government takes on board a recommendation from a committee led by the Singapore Business Federation (SBF).
Developing and attracting "unicorns" to Singapore - or startups valued at over US$1 billion - was listed as part of a proposed growth strategy, according to a Budget 2018 wishlist submitted to the government by the SME Committee (SMEC).
One way to position Singapore as a hub for high-potential startups and investors is to design incentives to entice potential unicorns to set up base or relocate to Singapore, said the SMEC.
Another way to incentivise private companies to invest in potential unicorns is through grants and tax incentives, and providing tax deductions and rebates for private companies with failed investments.
To benefit Singapore, the schemes should incorporate criteria such as a minimum equity stake in the potential unicorn company - 30 per cent for example, suggested the SMEC.
Other criteria include requiring the unicorn to house its headquarters, research and development, intellectual property (IP) holding and other key functions in Singapore. Another proposed requirement is the "creation of good jobs" for the Singapore economy and Singaporeans.
Lawrence Leow, chairman of the SMEC, explained during a press conference on Wednesday that the focus is to make Singapore's reputation known around the world as a place for unicorns to set up base.
Just like how Singapore is recognised globally for its attractiveness to multinational corporations, the idea is for the city-state to be likewise for unicorns or startups with potential to become one, he said.
He said: "What we are trying to propose is to tap the private enterprises' resources. Instead of the government coming up with grants and money to help the company (or startup), we're saying: Why don't we incentivise investors who are taking the risk?"
There are several paths that startups can take to potentially become unicorns, according to SMEC adviser Teo Ser Luck, who is currently involved in several ventures.
The first is to internationalise instead of solely focusing on the local business, he said.
Another way is for startups to either be acquired or merge with multinationals to help them grow and scale up.
Mr Teo raised the example of Facebook's purchase of photo-sharing app Instagram in 2012, when the startup was just two years old.
"Facebook purchased them (Instagram) when they were a lot smaller, and they have grown together. That's one of the objectives of the recommendations by the SMEC," he added.
But while attracting potential unicorns is one part of the equation, grooming local startups with the potential is another part of it.
Mr Leow said: "I don't think we're trying to say: focus on getting the big unicorns and forget about the small startups. Both can co-exist."
In a separate interview with The Business Times, he pointed out that Singapore has all the ingredients to successfully attract unicorns, such as location, connectivity, legal system, intellectual property expertise, and its status as a finance hub.
"All we need is to convince them to come," he added.
Right now, he noted, Singapore is still "lagging" slightly in terms of attracting and developing unicorns.
But he said that there must be a concerted effort on this front. "If you don't have a plan, if you don't have schemes, if you don't put in place resources to make this happen, then it (creating unicorns) will just happen by chance. That's no good. We have to make it happen."
He added that once these unicorns are based here, there will be many positive spin-offs such as jobs.
Aside from unicorns, another recommendation is to promote partnerships between large companies and SMEs. This is through tax or other incentives specifically for projects with substantial SME involvement to promote partnerships and collaborations between large companies and SMEs on overseas ventures.
The SMEC also called on the government to provide "broad-based" support to give SMEs a lift in their transformation efforts.
One proposal is for the government to consider a "credits-based scheme" which focuses on helping companies adopt relevant technology to support their business and train their staff to be future-ready. This would be similar to how the Productivity and Innovation Credit (PIC) supports SMEs in productivity and innovation, said the SMEC.
Another recommendation is the establishment of a voluntary Supplier Payment Code in Singapore, as well as better awareness of government procurement processes.
Ho Meng Kit, CEO of SBF, said that while SMEs are taking heed of the call to transform, they are also challenged by immediate operational issues, such as low profitability and tight cash flow.
"We call on our government to support the establishment of a voluntary Supplier Payment Code to enable SME suppliers to benefit from prompt payments which will enable better cash flow management," he said.
Senior Minister of State for Trade and Industry Sim Ann, who is adviser to the SMEC, said that the government will study the recommendations submitted "carefully and intently".
She added that the government is looking to work even more closely with the trade associations and chambers to further drive home the message of the need for business transformation.
For more stories on Budget 2018, click here.