By Ram S Ramanathan

As I write this on New Year’s Day 2002, almost everyone I have talked to hopes the coming year to be a better one than the last.

Hope is one factor, 2001 having been economically and politically a year of disasters being another, but mostly that every one realises Life goes in cycles and that it’s time for some good news to follow the bad.

Singapore as usual is more cautious than most, and the PM’s message cautions countrymen not to be too hopeful. Singapore is again at cross roads. Though it weathered the Asian crisis of 1997 successfully while neighbours went under, 2001 has been a very difficult year, with every economic indicator heading south.

In my last column I compared Singapore with India. My evaluation was that good and great Governance leads to dependency and loss of entrepreneurship. Is the contrary true? I am sure it is not. Bad Governance does not make people entrepreneurial, mainly corrupt and crooked. Given a choice I would prefer the Singaporean Governance model to that of India.

I recently looked at Hong Kong statistics and was struck by some similarities  with those of Singapore.  In 2000, Hong Kong with a population of 7 million had a GDP of US $ 160 plus billion, and a total trade of US $ 400 plus billion. Singapore had with a population of 4 million, GDP of S$ 160 billion and total trade of S$ 470 billion. Employment rates at 50% of population were the same.

Per person economic indicators were quite close but there the similarity ended. Hong Kong is a dynamo of personal endeavour and entrepreneurship, even with PRC breathing down its neck. Singapore is a planned economy with the Government taking the lead at every step. Market dynamics has been Hong Kong’s mantra. Much as most of Singapore believes in it too, State intervention is very obvious and consistent. Though official statistics put State investment in GLCs at 12%, extended impact of Government investment is greater than figures would indicate.

Over the 35 years of Singaporean history, Government’s priority has been creation of wealth. In this it has been extraordinarily successful, having lifted a third world country to first world ranking within a generation. To a large extent this wealth has been fairly well distributed unlike in many third world countries aspiring to such progress. Singapore has been an extraordinarily successful Corporation.

In terms of private initiative my submission is that Singapore has lagged behind Hong Kong, and that at times of crisis it is the individual and the market he creates that pulls through and not Government led initiatives.

Entrepreneurship is not a campaign promotable characteristic. It is a product of environment, and in some cases hereditary aided by upbringing. Entrepreneurs flourish in developing countries such as India and China, as they have no alternatives. Governance is a disaster in these countries, and individuals if they need to survive and flourish have to be street smart. People have hunger in their bellies, and also a fire of determination.

The other end of the spectrum is the USA, where entrepreneurship flourishes as a culture, not because it is need driven. The concept of no free lunches and the total absence of stigmas of failure constantly and consistently promote entrepreneurship. So it is in Hong Kong.

Singapore is in between, neither hungry nor culturally risk taking. My statistics may not be exact but close based generally on figures available from the Singapore Government portal. Out of a population of 4 million, of whom 2 million actively earn a living, my belief is that at least 500,000 are supported by the Government, either directly, through GLCs or projects funded by the Government. Probably more.

There are about 100,000 companies registered in Singapore. Roughly 20% are foreign controlled, and these account for roughly the same contribution to the GDP as the remaining 80% of local industries.  Over 90% of all Companies are classified as SMEs, which have annual revenues below S$ 15m and employ less than 200 people. These SMEs employ half the workforce and contribute one-third to value addition in the corporate sector, whatever this may mean.

The point of all these statistics is this. The SME sector which is the foundation of all entrepreneurship in any country, which in Singapore employs half the workforce and accounts for 90% of registered companies, has as of date less than 2000 companies with revenues over S$ 10 million. Total revenue from the SME sector is probably about 20% of GDP.

Vision of the SME 21 program of the Government is to develop over the next 10 years 4000 more such SMEs with individual revenues of over S$ 10m, or in aggregate add S$ 40 billion to the GDP. In 10 years, with a compounded growth rate of 7% that Singapore has been used to, GDP ought to be double at S$ 320 billion. This means that despite trebling the number of Companies with over S$ 10 m revenue in this period, total SME sector revenue may not rise much above the current level.

Is this the end game of entrepreneurship in Singapore? I hope my reading of published statistics is wrong, and that there is another explanation.

Qualitatively every entrepreneurial start up venture needs three and only three key inputs: Money, Mentoring and Market Development. So far the pre occupation has been with the first, however reluctant the Government and related Institutions may be to subsidies, grants and other monetary incentives to develop private initiatives. To a large extent these efforts have not worked.

Market is the key to any entrepreneurial initiative. Singapore is a limited market, further limited by the GLCs who dabble in everything from vegetables to real estate. Singapore’s entrepreneur has no chance unless he focuses outwards, while at the same time Government investments stay focussed only on strategic high investment areas.

With the absence of a strong entrepreneurial culture Singapore has a severe shortage of skilled veterans who can mentor Start Up entrepreneurs based on their own experience, instead of the bureaucrats and consultants who pass of as mentors today.

Wherever I look the solutions are missing. Do my fellow Mensans have any solutions to offer, to resolve what potentially is one of the most critical economic issues for Singapore?

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The article was published in the Mensa Singapore News Magazine, 'Menews', by the author.

Ram S Ramanathan is an experienced business executive currently focussing on building crossborder relationships between businesses in India and Singapore, and in helping SME companies in Singapore grow through mentoring, market development and fund facilitation.