In India, millions of young people play cricket. But only a few become star cricketers. This is true of MSMEs as well. So the basic rule in planning for industrial ascendance is to identify potential stars and pamper them. Put differently, a tough elimination round can be the starting point for any government support programme that targets industrial leadership. As India spreads it resources thin and starves potential winners of financial and technical resources, Singapore offers some essential learning in innovation-led industrial promotion, as explained to FE last week by George Abraham, chairman of SME Development Council, Confederation of Asia-Pacific Chambers of Commerce and Industry.
An innovative start-up funding idea from Singapore goes like this: any start-up with a paid-up capital of S$50,000 and that is less than five years old, can look for a third party investor who will put in S$75,000 in the firm. The outside investor (company) should be capable of adding value to the start-up. On this the government will provide the start-up S$1 million. So, the start-up now has S$225,000 to move to the next level. The presence of the third party investor, who has done due diligence, is a sort of guarantee that the start-up has a future.
Another creative incentive system in Singapore is the Innovation Voucher Scheme that links enterprises with knowledge institutions. Enterprises with an innovation need (for new product/process/practice) can apply for a S$5,000 voucher and use the same at any approved institution to get R&D support. This incentivises enterprises (pays nothing) and institutions (get paid) to work on new ideas. The voucher is only a bait. Once the entrepreneur sees a fighting chance for his idea, he will follow it up with own money. But no idea goes untested in industry.
A notable feature of SME promotion in the city state is that enterprise nurturing is led by industry chambers and trade associations. Government-run Enterprise Development Councils (EDCs) work from the premises of the chamber/associations for close coordination. Chambers vet all start-up and funding proposals while the fund is released by EDCs. This close industry-government interface makes industrial promotion a breeze.
Once an enterprise is identified to have the potential and is granted funds, a consultant (usually a retired professional from the same domain) is deputed to its office/factory, typically for six months, to do hand-holding and to ensure that the funds are not wasted. Actually, any SME can hire such ‘business advisors’, and the government agency would bear half the fee (uniform and fixed).Enterprises can also get HR, brand and intellectual property consultants at subsidised rates.
Schools and colleges are part of the mentoring process. The Young Enterpreneurship Scheme (Yes!) supports enterpreneurship development programmes in 41 schools in the island state. A young aspirant can get up to S$50,000 to turn his idea into a business.
There is a Management Associate Programme to ensure a strong pipeline of talent to high-growth and dynamic SMEs. Government agency hires local university graduates at a uniform salary for deployment in SMEs. An enterprise can have up to 10% of its staff straight from universities, subject to a ceiling of 10 persons.
There is a state programme to place university/polytechnic students on internship in SMEs.(In India, this is the burden of students). In yet another Executive Development Scholarship, an eligible college/polytechnic student can get up to four years of all inclusive scholarship for studies, provided he promises to work in an SME for two years.
But a rider is necessary here. The agencies go overboard to help only the promising enterprises. Also-ran businesses can be happy with general incentives. The entire system works on merit and transparency, points out Abraham, who is also the Asean representative of Ficci and director of TiE Singapore.
Singapore has eight agencies assisting SMEs, including the one responsible for running the EnterpriseOne portal, which guides an entrepreneur on almost everything, from a self-assessment kit to details of all support schemes, incentives, laws, taxes and online applications; nothing is left our by the website. A visit to the portal itself would be good education.