SMEs in Singapore outcompeted by Temasek Holdings


Government Itself a Cause

¶5. (C) Entrepreneurs continue to face obstacles in a number
of sectors in the form of Government-Linked Corporations
(GLCs), which account for nearly 60 percent of the national
GDP. Temasek Holdings, the government’s investment arm, is
by far the largest investor in Singapore, with an estimated
50-percent stake in Singapore’s GLCs. GLCs often compete
against each other in key markets, making entry by an
independently-held company difficult. For example, SingTel
and Starhub, both Temasek Holdings companies, compete
directly in the wireless service market and will soon do the
same in the cable television market. The strong GOS role in
directing the economy likely has the unintended result of
“crowding out” natural economic development, according Dr.
Sha Reilly, Chief Knowledge Officer at the National Library
Board (NLB), which has a mandate to encourage creativity and
entrepreneurship among young Singaporeans. She believes

SINGAPORE 00000394 002 OF 003

Singaporeans look first to the government, rather than the
private sector, to be the innovation leader.

¶6. (C) Small and medium sized enterprises (SMEs) — a
potential source of innovation and commercial nimbleness —
find it difficult to secure financing for their businesses
since financial institutions, accustomed to an abundance of
large corporate customers, are reluctant to lend to riskier
SMEs. The 2007 GEM report ranked Singapore 17 out of 21
countries for venture capital availability. The Singapore
Stock Exchange (SGX) is similarly inhospitable to SMEs, with
many Singaporean entrepreneurs opting to list in other
countries. SGX Executive Vice President Lawrence Wong told
us that the SGX targets SMEs with a capitalization of SG$500
million to SG$5 billion ($327 million – $3.27 billion). Wong
characterized the amount as “not a lot,” but it does put SGX
listing out of the range of many SMEs. He says a GOS
proposal to develop an exchange catering to smaller firms was
“still under discussion.”

7.(C) While the government has allocated various funds to
encourage SMEs, a number of business leaders told us that
funding is still inadequate. They suggested that even if
sufficient funding were available, it would still take at
least a generation before an entrepreneurial culture would
truly take root. Of the $4.9 billion STP2010 budget, less
then two percent has been allocated for SME financing.
Inderjit Singh, a Member of Parliament and an entrepreneur,
told us that the proliferation of entrepreneurial schemes for
SMEs was “government lip-service that fails to address the
critical need to divest GLCs and open markets.”


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