Mothership: S’poreans’ risk aversion holds back SMEs, could affect future economy: former MP Inderjit Singh
Published: 19 June 2022
S’poreans’ risk aversion holds back SMEs, could affect future economy: former MP Inderjit Singh
Former People’s Action Party (PAP) Member of Parliament (MP) and entrepreneur Inderjit Singh is not one to mince his words as he outlines a possible future for Singapore.
“The day that we stop having meaningful jobs, we’ll be a net exporter of labour… [And] if let’s say the economy hollows because of an exodus, we could be in a lot of trouble,” he warns.
Singh, 61, explains his view that Singapore needs to do more to build up a strong core of local businesses that can provide those meaningful jobs for future generations.
Depending on the multinational companies (MNCs) to anchor the local economy may still work for the next decade or so.
After all, MNCs’ presence in Singapore contributes to the economy and offers Singaporeans opportunities for “value-added employment”.
MNCs’ departure from Singapore could have severe impact
But if conditions change and they leave, this could have a severe impact.
MNCs have played a key role in Singapore’s economy since independence.
The government’s overt pro-MNC policy has been credited as one of two key strategies that helped post-independence Singapore reach full employment within a decade.
Today, many large multinationals have chosen to place their international or regional headquarters in Singapore.
And, as the Economic Development Board (EDB) highlights, Singapore is home to the largest number of headquarters jobs from global Fortune 500 companies compared with other key Asia hubs as of 2018.
Singh is not so optimistic about this situation, however, saying:
“If they leave, they could take away a big chunk of jobs. [And] we won’t have enough companies in Singapore who can offer that kind of job.”
MNCs setting up in Singapore amid Covid-19
Singh’s views are no doubt shaped by his involvement in the entrepreneurship scene in Singapore since the late 1990s, first as a serial entrepreneur himself (with six companies now under his belt), as a politician (who spoke frequently on business-related matters in Parliament), and then as a founding member of the Action Community for Entrepreneurship (ACE) — a non-profit organisation created to represent startups in Singapore.
The adjunct professor at the Nanyang Technological University of Singapore clarifies that it is “not necessarily bad” for the government to be attracting MNCs to invest in Singapore’s economy.
But he points out that the most recent influx of MNCs landed in Singapore partly “because of the pandemic, and because of the turbulence around the world”.
“During Covid, many governments messed up. And I mean, we [in Singapore] were not perfect, but then we were still quite transparent, we chugged along, and people were looking for stable places…
So we bought some time for ourselves. But we should not get so comfortable that we forget about grooming our local enterprises.”
“One day, when things stabilise and MNCs start moving out, we may not be the best place for them,” he warns.
“And then, will we have enough core local SMEs to be able to hold the fort?” he asks, rhetorically.
More support needed for SMEs
Granted, MNCs’ contributions to the economy are different from SMEs’.
As a Ministry of Trade and Industry spokesperson pointed out in 2015, the payback that Singapore receives for providing incentives for MNCs can come in the form of their help to “anchor and grow key new sectors”.
But Singh believes that more can be done to support the next generation of up-and-coming Singapore companies — including extending them some of the perks currently reserved for MNCs.
Risk of creating “zombie companies” with too much support
Of course, increasing support has to be done strategically.
Singh cites the danger of government support inadvertently propping up “zombie companies” if it is given out too freely.
The term “zombie company”, coined by Wong Poh Kam, the director of the National University of Singapore (NUS)’s Entrepreneurship Centre, refers to a company that generates little growth and employment but is still able to stay afloat.
Singh’s suggestion to counter this risk?
Identify certain sectors that are likely to grow, and which can be the anchor for Singapore’s future economy, such as prototyping.
He explains that ideas for new products that come out of research laboratories will need to go through a prototyping phase before they go on to be mass-produced.
“China is the right place for mass production. But that gap from lab to mass production, that is the prototyping [phase], proving the [product’s] manufacturing capability. That portion, I think we can do a lot more.”
Entrepreneurship a way of thinking, not just for those doing business
Singh shared these thoughts in a recent interview with Mothership where we discussed his new book, The Art and Science of Entrepreneurship.
The nearly 500-page tome did not start out as a book – his writing efforts began in 2002 when Singh started preparing his speeches on entrepreneurship.
He explains that what he’s written is intended to be a manual of sorts for anyone seeking to learn about entrepreneurship.
Singh stresses that entrepreneurship is not just something for those who want to set up a business.
It is, rather, a way of thinking that he commends in all spheres, including doing business and even dealing with family issues.
This is why the first part of Singh’s book (titled “The Art of Entrepreneurship”) captures the mindset of an entrepreneur, before moving on to the “nuts and bolts” of starting a business in the next section (titled “The Science of Entrepreneurship”) for those so inclined.
There is also a third section titled “Useful Lessons Learnt”, which includes Singh’s takeaways from challenging times such as the burst of the dot-com bubble, and Covid-19.
Singh’s book concludes with a highly personal account of his entrepreneurship journey, with him starting a number of successful businesses to raising a record amount of investments (US $138 million) on a business plan without execution track record.
How are Singaporeans risk-averse?
There was a recurring theme in our conversation on how Singaporean mindsets might be at odds with the entrepreneurial spirit: That risk-aversion is one of the major limiting factors for entrepreneurship in Singapore.
Singh explained a number of different ways that he sees risk-aversion getting in the way of entrepreneurship:
- Being satisfied with “the first sign of success”
“For you to become bigger, you have to take more risk. And I think the moment there is the first sign of success, many feel like, ‘Oh, why risk it further?'” he says, of Singapore business owners he has met.
In contrast, Singh explains in his book (under a section titled “The Unending Entrepreneurship Journey”) that by his definition, “the sign of a good entrepreneur” is in fact one who “never sees himself or herself as having achieved great success”.
Even one who has exited their business will “continue doing other entrepreneurial things” like staring a new business, or mentoring other entrepreneurs.
- Not thinking about expanding beyond Singapore
“Any entrepreneur who thinks, ‘Let me do Singapore market first, and I’ll think about going overseas’ will not succeed,” declares Singh. “You want to be successful, right from day one, you must have a global plan.”
Singh says he has seen companies that “grow to a certain extent in Singapore” before their founders run out of stamina.
From that point, taking on the additional risk of expanding overseas is difficult to stomach, he explains.
Besides the limited stamina of the founders, local companies also run into unique constraints in Singapore’s domestic market.
Small size aside, Singapore is not a great first adopter of new technologies, Singh says.
This is a characteristic that can be traced back to being risk-averse as well.
“Why be responsible if it fails?” says Singh, of the mindset that many in Singapore have toward innovation.
This holds back entrepreneurship here, because innovative products need to go elsewhere to have better chances at launching.
“It’s very difficult to say that ‘I test here first, and then I go out.’
You may actually do something that is wrong — wrong business model, wrong product for Singapore market — [but it] may be something that another market needs. And so it’s best to think global right from day one.”
- Being unwilling to move overseas
A related issue that Singh highlights is that some are unwilling to even move overseas in the first place.
“And I think that is one of our biggest weaknesses,” he says.
“[We are] very comfortable living in a safe environment in Singapore. If you move to a city in Indonesia, or Vietnam, it’s more challenging.”
Indonesia and Vietnam are countries Singh highlights as examples of places where startup culture is vibrant.
One of Singh’s early ventures — the United Test and Assembly Center (UTAC), which provided test and assembly services for semiconductor devices — became an international success, attaining a US$2 billion (S$2.78 billion) valuation just three years after it was started in 1998.
Singh has continued to start businesses both here and abroad, including consumer electronics brand Solstar, which has a presence in 12 countries outside of Singapore, including 11 African countries.
“I can’t find anyone to go to Africa from Singapore,” he comments.
“Okay, don’t go to Africa, but Indonesia, we should be okay right?” adds Singh with a small laugh.
Switching to a more serious tone, Singh explains that Singaporeans are generally “too comfortable”:
“We are so comfortable, not willing to take the risk or the discomfort, that comes with going into different places.
Down here [in Singapore], the government does everything for us, so you know that if anything [happens] you can complain, [but] if you go [overseas] you have to fight.”
Where does risk-aversion come from? The wrong thinking that one “cannot fail”
“In the entrepreneurial journey, in most places, failure is not the end,” Singh muses. “For us [in Singapore], it is so. That’s been ingrained in us from young.”
Singh recognises that there have been significant developments for the better — the recognition of non-academic talents in areas like the arts, and in sports, is “big progress” toward a more flexible system that gives second chances.
“In the past, you fail your exam at one level, and it’s considered a dead end,” Singh observed.
But now, changes to the system — such as subject-based banding (SBB), have given children different routes to success.
Drawing a contrast to highlight how things have changed over time, Singh recalls an occasion when he was still an MP, when a mother approached him to talk about her son.
Singh remembers that she wanted to move her son out of the EM3 stream (the lowest stream in the now-abolished streaming system), saying things like “he got no more future” and “it’s a dead end for him”.
“In front of her son! I was so sad that the poor boy had to hear that, and the mother felt that it’s the end,” remembers Singh.
For Singh, that encounter showed him the importance of the school system and how it had a part to play in establishing certain attitudes toward success and failure in general.
It’s not difficult to see how such an attitude towards failure would hinder entrepreneurship, by creating a disincentive for people to get into the risky realm of starting a business, or supporting a visionary’s entrepreneurial ideas.
On the other hand, Singh describes the entrepreneur’s mindset as follows:
“Even if they do see a great chance of failure, they might still be willing to take that risk to create success. On the surface, it might look like reckless risk taking, but in the mind of entrepreneurs, they would have pondered the consequences and taken the steps to minimise the possibility of failing — in other words, they take a calculated risk.”
Here, Singh draws a line between risk-taking entrepreneurs and those who try to mitigate “all existing risks” so as to increase their chances of success.
Such people, Singh says, are merely “good managers”.
View the Mothership article here.