Reference No.

: WP2000-01

From Leveraging Multinational Corporations to Fostering

Technopreneurship: The Changing Role of S&T Policy in Singapore

Wong Poh Kam

Director,
Centre for Management of Innovation and Technopreneurship
National University of Singapore

1
1. Introduction

Since achieving political independence in 1965, Singapore has achieved remarkable

economic growth over the last three and a half decades (see Table 1). As of 1998, Singapore’s
per capita GDP on a PPP basis stood at over US$28,200, which was second highest in the world
after the USA, surpassing even Japan, Germany and Switzerland. This is a remarkable economic
growth performance: In 1965, Singapore’s PPP-adjusted per capita GDP was less than 16% of
that of the USA; as late as 1980, it was still less than 50% (Wong 1999a).

The rapid economic growth of Singapore has been achieved through continuous industrial
re-structuring and upgrading (Wong 1999a). While labor-intensive manufacturing was largely
responsible for the early take-off of economic growth in Singapore in the first decade after
political independence in 1965, the sustained high economic growth performance of Singapore in
the two subsequent decades was propelled by rapid technological upgrading of manufacturing. In
addition, the development of Singapore into an increasingly important business, financial,
transport, communications services hub in the Asia-Pacific region provided additional engines of
growth (see Table 2). Nevertheless, manufacturing remained an important source of growth for
the Singapore economy right up to the end of 1990s, with its share of total GDP remaining above
25% for most years throughout the last two decades.

Like Korea and Taiwan, Singapore's increasingly technology-intensive industrial

development has been supported by significant government initiatives in technical manpower
development and infrastructural investments. The Singapore government has also been a lead user
in deploying new technologies, especially information technology (IT). However, unlike Korea
and Taiwan, Singapore's rapid technological development has, until recent years, been largely
dependent on multinational corporations (MNCs), rather than on indigenous companies (large
chaebols in the case of Korea (Amsden 1989), and numerous small and medium-sized firms in the
case of Taiwan (Dahlman and Sananikone 1990)). About three-quarter of Singapore’s
manufacturing output in recent years were contributed by MNCs, and foreign capital constituted
more than 60 per cent of the equity capital of manufacturing firms in Singapore (Wong, 1999a).
Technology transfer from MNC headquarters to their subsidiaries in Singapore has therefore been
a major source of technological upgrading in Singapore, rather than indigenous research and
development. Publicly funded R&D was also on a smaller scale than in Taiwan and Korea.
Overall, Singapore's total R&D spending as a ratio of GDP had been consistently lower than that
of Korea and Taiwan, let alone the advanced industrial countries (see Table 3).

Since the late 1980s, however, the pace of S&T development in Singapore has
accelerated. The Singapore government has intensified its effort to promote R&D and technology
intensive activities with the establishment of a new National Science and Technology Board
(NSTB) and the launching of a National Technology Plan (NTP) over 1991-95, followed by a
more ambitious Second National Science and Technology Plan (NSTP) over 1996-2000. Local
companies are also beginning to play a bigger technological innovation role. Meanwhile, more
and more foreign MNCs are investing in R&D activities and upgrading their manufacturing
process technologies in Singapore. As Singapore approaches the next millenium, however, we
can expect the pace of S&T development to be further intensified, with an increasing policy focus
on promoting technopreneurship. In short, the national innovation system of Singapore is being
transformed from an initial one emphasizing the assimilation and diffusion of technology through

2
leveraging large foreign high-tech MNCs to one focusing on promoting technopreneurial start-
ups.

The main aim of this paper is to analyze the changing structure of Singapore’s national
innovation system and how the role of Singapore’s S&T policies has changed in response to the
changing needs of the innovation system. A second objective is to highlight the key future S&T
policy issues and challenges that the country needs to tackle over the next decade. The
organization of the paper is as follows. In Section 2, we introduce a theoretical framework for
analyzing the structure of national innovation system (NIS) and its relationship to economic
performance. The framework also highlights how public policy can shape and influence a national
innovation system. Section 3 then applies this framework to provide a stylized analysis of how
Singapore’s national innovation system has historically evolved over four different stages of
economic development of Singapore. Section 4 discusses how the role of public S&T policy has
changed over time in support of the different stages of national innovation system development.
An analysis of the emerging institutional framework for S&T policy coordination in Singapore is
also provided. Section 5 highlights the key public S&T policy challenges that Singapore faces at
the dawn of the next millenium. Finally, Section 6 provides a brief conclusion.

2. Theoretical Framework for National Innovation System Analysis

2.1 Concept of National innovation System

As highlighted by the rapidly growing research literature on innovation policy (see e.g.
OECD 1997, Nelson 1993), the impact of national science and technology policy is best examined
using a national innovation system (NIS) approach that seeks to understand how firms and public
institutions interact as a system to develop and use S&T resources to achieve economic
development. A national innovation system encompasses all innovative activities rather than just
the R&D system (OECD,1993). While there is by now a vast literature on the national innovation
system characteristics of advanced industrial countries (see e.g. Freeman 1982, Dosi et.al. 1988,
Nelson 1993, Lundvall 1992 and OECD 1997), they tend to emphasize analytical elements more
relevant to advanced countries. The literature on NIS of late-industrializing countries is only
recently emerging, and it suggests the need to adapt the NIS framework for advanced countries
to better suit the analysis of late-industrializing countries (Dahlman and Kim 1992, Suh 1998,
Wong 1999b).

2.2 NIS Framework for Small, Late-Industrializing Economies

For the purpose of this study, we utilize the analytical framework for NIS of late-
industrializing countries as proposed in Wong(1995a,1999b). Figure 1 provides a summary view
of the proposed NIS framework. In essence, the proposed framework identifies three key groups
of innovation actors in an economy: the enterprise sector, the public S&T institution sector, and
the manpower development sector. These three groups of actors interact with one another to
achieve the two key objectives of a NIS: (1) to build up the stock of scientific and technological
resources; and (2) to allocate and deploy these resources to the respective innovation actors.

Since no nation exists in isolation, the technological resources accumulated within a

nation can be derived not only from technology development processes within the nation, but also
from importation or transfer of technology developed elsewhere. Similarly, technological

3
resources developed within a nation needs not be deployed within the nation, hut could be
deployed overseas.

The technological resources developed or deployed through innovation processes can be

broadly divided into two categories: (i) tangible know-how as embodied in capital equipment
(including hardware as well as software) and tangible intellectual properties as embodied in
patents, copyrights, trademarks, etc.; and (ii) intangible know-how (skills, knowledge and
creativity) as embodied in people. The creation of both tangible and intangible know-how takes
place in all three innovation actor groups. For example, the development of technical skills does
not take place within formal education and training institutions only; manpower resource
development also takes place within firms and R&D institutions through learning by using (i.e.
the learning that is acquired through utilizing a given technology) and learning by doing (i.e. the
learning that is acquired through engaging in R&D activities).

Obviously, both the technological resource development and deployment processes

themselves consume technological resources as well as other non-technological resources. The
performance of a national innovation system is thus measured by the effectiveness of the
deployment as well as the development (creation) processes. High development effectiveness by
itself is not sufficient, since if the deployment process is not effective, the system will be left with
much under-utilized (or mis-utilized) technological resources, resulting in low returns to the
efforts expended in the development process. In the terms of Roemer(1992), there needs to be a
good balance between “using ideas” and “producing ideas”.

Figure 1 highlights the importance of effective linkages among the three groups of
innovation actors to facilitate the development and deployment of technological resources in a
national innovation system, e.g. close interaction between suppliers and buyers or users; strategic
technology alliance between firms; university-industry R&D collaboration, and high involvement
of industry in the design of the training programs of training institutions.

An important form of external technology linkages, particularly for small, newly

industrializing economies, are the international technology linkages between the actors within an
national innovation system and external actors, or actors located in other national innovation
systems. Such linkages could take the form of intra-firm technology transfer between the parent
headquarters and the overseas subsidiaries of a transnational corporation, arms-length market
transactions of technology goods or services (equipment purchase, technology licensing, etc.), or
any other "intermediate" form of technology transaction between market and internal hierarchy
(e.g. international R&D consortium, common technical standards coalition, cross-licensing of
technologies, long-term supplier-buyer relationship, etc. ).

International technology linkages between innovation actors from different national

innovation systems are the means through which actual flows of non-human embodied
technological resources across national borders are induced. Such linkages are also a major driver
for the international flows of technical manpower, through intra-company staff transfer among
MNC business units, company sponsored participation in international conferences, trade-shows,
etc. However, the international flow of technical manpower also has a dynamic of its own,
through the voluntary migration of people from one country to another, the choice of students
from developing countries to study in overseas universities, and the reverse flow of graduates and
experienced employees in advanced countries back to their home countries, etc.

4
2.3 The role of government policies and institutions in shaping NIS

Most countries have established a set of government institutions and policy instruments
specially designed to influence S&T development. However, based on our analysis framework,
the role of government in national innovation system cannot be confined to these special
institutions and their policy instruments only; in principle, any government policy or institution
that has an influence on the behaviour and performance of any component of a national
innovation system should be taken into account, regardless of whether the policy or institution is
designed with the explicit intention to influence S&T development or not. In view of this, we can
broadly divide the government role into two broad categories:

(i) The direct involvement role of operating public R&D institutions and public education and
training institutions.

In this role, the government directly involves in innovation efforts. We can in principle
evaluate the effectiveness of this government role in terms of the innovation performance of these
institutions as narrowly defined in terms of the amount of technological resources created (e.g.
number patents and publications generated by public R&D institutions; number of graduates
trained in the case of training institutions). In a national innovation system framework, however,
it may be more useful to assess the impact of these institutions in terms of the eventual
deployment performance of the technological resources they generate (e.g. number of patents
actually licensed, actual employment of graduates).

(ii) The indirect role of instituting policies and regulatory frameworks that have the effect of
affecting the performance of national innovation system.

Relevant public policies and regulations that are likely to affect the performance of a
national innovation system include not only the “proximate” S&T policies as narrowly defined in
the literature such as R&D grants and tax incentives, but also other more general policies that
affect the incentive of firms to innovate, the incentives of individuals to train and learn new skills,
and the efficient functioning of both domestic linkage mechanisms (e.g. university-industry
linkages and inter-firm linkages) as well as international ones (e.g. incentives f'or MNCs to
transfer technology to their foreign subsidiaries). Consequently, the set of relevant policies and
institutions can be rather broad, ranging from macro-economic policies (e.g. interest rate policy
and price-stabilization policy), financial policies, trade policies, industrial and competition policies
(fiscal incentive for specific industries, foreign investment policies, etc.) to more specific S&T
policies related to R&D, technology adoption and manpower development (e.g. subsidies for
R&D in general or in particular areas, incentives for acquisition of certain technology goods,
training grants for specific skills, etc.).

Although there is a tendency in the national innovation system literature to focus analysis
on the more proximate S&T policies, there is no a priori theoretical reasons why the impacts of
the more general economic policies might not be stronger than the more proximate S&T policies.
For example, it has been argued that macroeconomic stability and external orientation (World
Bank, 1993) and competition policy (Porter,1900) may have a much stronger impact on firm's
innovation behaviour than e.g. tax incentives for R&D. Consequently, in our analysis framework,
we must incorporate all important features of public policies that have a significant impact on the
behaviour of innovation actors, regardless of whether they emanate from proximate government
S&T policy agencies or from more general macroeconomic, industrial and educational policies. In

5
addition, significant political and social changes in the national environment as well as changes in
the international business environment may also have significant impact on the behaviour of
innovation actors, and these need to be taken into account as well, as summarized in Figure 1.

2.4 Summary

In summary, our proposed analytical framework for national innovation system analysis
distinguishes three groups of innovation actors (the enterprise, public R&D and manpower
development sectors) and examines how they dynamically interact to create and deploy S&T
resources. In this framework, the effect of public policies in general and S&T policies in particular
on the technological development performance of a country is analyzed in terms of how they
influence the structure and behaviour of the NIS. While it is conventional to divide public policy
domains into S&T policies and other broader economic policies (e.g. macroeconomic and
industrial policies, international trade and investment policies, infrastructural development, etc.),
our proposed NIS framework highlights the need to consider all public policies that directly or
indirectly exert a significant influence on the performance of NIS. We adopt such a more holistic
approach to study the dynamics of change of Singapore’s NIS.

3. Dynamics of Change in Singapore's National Innovation System

3.1 Distinctive Phases in the Evolution of Singapore’s National Innovation System

Just as the overall economic development of Singapore can be usefully analyzed as

evolving through four distinctive phases (Wong,1999a), the evolution of Singapore’s NIS can be
similarly analyzed as undergoing four distinctive phases of change over the last 4 decades:

a) Industrial Take-Off Phase: The period from early 1960s to mid-1970s, which can be
characterized by high dependence on technology transfer from foreign MNCs;

b) Local Process Technological Deepening Phase: The period from mid-1970s to late-1980s,
which can be characterized by rapid growth of local process technological development
within MNCs and through the development of local supporting industries;

c) R&D Expansion Phase: The period of late-1980s to late-1990s, which can be characterized
by the rapid expansion of R&D activities by MNCs, public R&D institutions and later local
firms;

d) Technopreneurial Development Phase: The period from late-1990s onwards, which can be
characterized by the emerging emphasis on technopreneurial start-ups

In what follows, we briefly highlight the stylized features of Singapore’s NIS in each of
these phases.

(a) Industrial Take-Off Phase (mid-1960s to mid-1970s)

The first decade since political independence from Malaysia in 1965 marked a period of
rapid industrial take-off based on export-oriented manufacturing by foreign MNCs. Referring
back to Figure 1, this period saw the tangible S&T resources of the country being rapidly built up
primarily through the transfer of manufacturing technologies as embodied in direct foreign

6
investment (DFI) by foreign MNCs. At the same time, the intangible skill base of the country was
being built up primarily through expansion of primary/secondary education and technical training
institutions on the one hand, and by “learning by using” among workers and technicians employed
within these foreign MNCs.

There were few innovation linkages between these large MNCs and the rest of the
economy during this period. Little local supporting industries existed, and the main source of
advantage of Singapore as an offshore production platform for MNCs was the abundant supply of
cheap labor. The main form of technological learning took the form of skills upgrading among
operators and technicians working within these MNCs.

b) Local Process Technological Deepening Phase (mid-1970s to late-1980s)

The mid-1970s saw the beginning of rapid growth of indigenous manufacturing process
capabilities. Local operators, technicians, engineers and managers working in MNCs were no
longer just learning to use foreign technologies transferred from parent headquarters, but were
beginning to be able to adapt and improve upon them through learning by doing. They were also
able to absorb more sophisticated process technologies. At the same time, a base of local
supporting industries began to emerge, and these local firms started to invest efforts in acquiring
and exploiting imported technologies on their own, in addition to learning from their MNC
customers through “learning by transacting” (Wong, 1992).

The development of intangible technical skills also shifted significantly from operators to
more advanced technicians and basic tertiary engineering manpower through the rapid expansion
of polytechnics and university engineering courses (see Table 4). In addition, Singapore started
to attract large number of tertiary-educated manpower from overseas in this period, especially
from Malaysia.

c) R&D Expansion Phase (late-1980s to late-1990s)

After a severe economic downturn in 1985 which saw the economy in recession for the
first time in many years, the manufacturing sector quickly recovered its dynamism in the second
half of the 1980s. Besides intensification of manufacturing process technological upgrading by
the successive new waves of DFI since 1985, there was a rapid take-off of R&D activities from
the late 1980s onwards. Firstly, an increasing number of MNCs were beginning to establish R&D
activities in Singapore for the first time. Secondly, this period saw the establishment of an
increasing number of public R&D institutions and a significant expansion of R&D activities at the
tertiary institutions (see Table 5-7). Thirdly, some of the more technology-intensive local firms
were beginning to invest in R&D; in particular, the strong growth of the Singapore Technology
group and other large government-linked companies (GLCs) also added impetus to local R&D.

At the same time that R&D expanded, there was continuing deepening of local process
capabilities development; resulting in some MNCs establishing their lead manufacturing plants in
Singapore. An increasing number of MNC manufacturing plants were also taking on the process
technology transfer station roles, providing the process engineering know-how to develop new
processes to support new product launches and later transferring them to other countries after
they had become stabilized.

7
 In terms of the development of intangible technological skills, the emphasis of human
capital formation increasingly shifted from technician training to widening enrollment in
technology courses at the local universities. As can be seen from Table 4 earlier, the rate of
growth of university graduates began to exceed that of polytechnics graduates in this period.
Significant technological development of the local supporting industries was induced by the
various leading MNCs in Singapore through increasing outsourcing and intensification of the
“learning by transacting” processes. Finally, the various R&D activities taking place were
providing important training grounds for the acquisition of new R&D skills.

d) Technopreneurial Development Phase(late-1990s to ?)

As the Singapore economy approaches the millenium, another distinctly new phase
appears to be emerging: The beginning of technopreneurial start-up activities similar in spirit and
style to the Silicon Valley model. Whereas the local start-ups in the earlier period were mainly in
manufacturing and primarily served as suppliers and contract manufacturers to large MNCs, the
new start-ups emerging since the late 1990s were more product innovation oriented and
increasingly focused on IT, software, internet applications, biotechnology and life-sciences.
Venture capital (VC) and business angels were becoming increasingly important as a source for
funding. In 1998, 40 start-ups received S$160 million of venture capital funding, with 38% in IT,
25% in electronics, and 15% in life sciences. The cumulative number of VC-backed start-ups in
Singapore at the end of 1998 was estimated at 310, of which 57 had gone public; the majority
were technology-based (EDB 1999). In particular, spin-offs from universities and public R&D
institutions were beginning to increase in frequencies.

In summary, the national innovation system of Singapore can be characterised as

increasingly shifting from emphasizing technology deployment activities to technology creation
and technopreneuring activities (Figure 2). As emphasized above, each new phase built upon the
technological resources accumulated from the earlier phases. The momentum of each phase
continued even as new forms of growth were introduced, involving new actors and new forms of
linkages among existing actors. In particular, there was a phased building up of foreign MNCs,
local manufacturing enterprises (particularly in the electronics supporting industries), PRICs and
university R&D, and lastly local technopreneurial start-ups pioneering new products. In terms of
technology capability development routes, there was a sustained shift from reliance on internal
transfer by MNCs, learning by doing, external acquisition by local firms, own R&D, and new
venture creation.

3.2 The Emerging Characteristics of Singapore’s NIS at the turn of the Millenium

It is useful to provide a more detailed picture of the emerging structure of Singapore’s

NIS at the turn of the millenium in terms of the overall portfolio of technological innovation
activities. As indicated in a stylized fashion in Figure 2, while technology deployment activities
continue to be important, the cumulative structure of the NIS of Singapore by the end of the
1990s has become more balanced with technology development activities rapidly catching up vs.
deployment activities.

Technology Development Patterns

Singapore’s gross expenditure on R&D (GERD) had increased six-fold between 1987 and
1998, reaching S$2.33 billion in 1998, or 1.65% of GDP (Table 5). The number of research

8
scientists and engineers (RSEs) per 10,000 labor force reached 66 in 1998. Both the public and
private sector had contributed to this impressive growth in R&D intensities. As can be seen from
Table 6, although R&D expenditure by tertiary educational institutions and public R&D institutes
had expanded significantly in absolute terms, their relative importance had actually diminished
over the period from mid-1980s to the late-1990s as R&D expenditure by the private enterprise
sector grew even faster.

In terms of economic sectors, manufacturing as expected constitutes the major industries

performing R&D in the mid-1990s (see Table 8), but it is important to note that the services
sector also played a rather significant role as well, accounting for between 12 to 21% of total
R&D spending from 1993 to 1997. Industrial R&D efforts were highly skewed, however, with
close to 70% of the manufacturing R&D being concentrated in the electronics and IT-related
sector alone. This is consistent with the fact that electronics and IT have been the most important
and most dynamic sectors in Singapore's economy since the 1980s.

Among private sector firms performing R&D, because foreign MNCs still account for the
bulk of the technology-intensive industries, it is not surprising that they also account for a larger
proportion of R&D activities in Singapore than local firms. As can be seen from Table 9, in
1997, foreign-controlled firms accounted for over 61% of private R&D spending, down from
over two-thirds in earlier years. Reflecting the concentration of MNCs in the electronics and
chemicals sector, the largest concentration of MNC R&D activities is to be found in these two
sectors, which accounted for over 70% of total MNC R&D. The dominance of MNCs in the
R&D activities of these two sectors were also the most pronounced: MNCs accounted for over
83% and 67% respectively of the total private R&D in these sectors (Table 10).

Although still accounting for less than 40% of private R&D spending in 1997, local
enterprises had been expanding their R&D rapidly in recent years. Unlike R&D by MNCs, R&D
activities by local enterprises had become more diversified. While electronics and
IT/communications accounted for over half of the total local enterprise R&D spending in 1997,
there was significant R&D in precision engineering, transport engineering, as well as finance,
business and other services.

Among the local firms that engage in R&D activities, we can distinguish three different
groups. The first group consists of the more technically advanced small and medium-sized
enterprises operating in the various supporting industries supplying to MNCs, particularly
precision engineering. Good examples include Amtek (metal stamping), Uraco and MMI
(precision metal engineering), Meiban and Lixin (precision plastic moulding), Gul technology and
Circuit Plus (printed/flexible circuit board), and Venture Manafacturing and JIT (contract
manufacturing). The major focus of their technical efforts is in improving their manufacturing
process capability to meet the stringent quality, cost and delivery demand of their large MNC
customers. However, some of these firms have started to diversify into own product innovation
activities.

The second group consists of the various state-controlled enterprises established by the
Singapore government with the specific aim to spearhead local participation in high-tech
industries. Called government-linked companies (GLCs), these companies have strong financial
backing from holding companies established by the government and hence have been able to
commit significant investment in innovation activities. Among the more significant players include
the companies within the Singapore Technology Group, Sembawang Group and Keppel Group.

9
The Singapore Technology Group, for example, has subsidiaries that are engaged in aerospace
repair/maintenance engineering (ST Aerospace), semiconductor fabrication (Chartered
Semiconductor Manufacturing), electronics systems integration (ST Electronics Engineering) and
computer software systems (ST Computer). The Natsteel group has diversified away from steel
making to electronics contract manufacturing (Natsteel Electroincs and Natsteel Broadway).

The third and last group of local enterprises consists of a small but rapidly increasing
number of entrepreneurial high-tech start-up firms that seek to pioneer innovative products and
through their own R&D and brand development. Early examples of such firms include PC firms
like IPC and GES, audio-cards firms like Creative and Aztech, industrial electronics firms like
Powermatics, Teledata and Eutech Cybernetics, machine tools makers and industrial machinery
makers such as Excel Machine Tools and Falmac, software companies like CSA and Ednovation,
and pharmaceutical/biotech firms like Genelabs, HawPar Healthcare Products and Zagro.
Although most of these represent independent startups, some are new ventures financed by large
local conglomerates which seek to diversify into high-tech industries, e.g. HawPar Healthcare
Products belonging to the HawPar group, and Wearnes Technologies belonging to the Wearnes
Brothers group. Over time, some of these independent start-ups got absorbed by larger firms
(e.g. Eutech Cybernetics has been acquired by CSA, which in turn has been acquired by an
American software giant).

More recently, a second wave of new technopreneurial firms are seen emerging,
particularly in the IT, internet and life sciences area. Unlike the earlier start-ups where the
founders typically came from having worked in industries (especially MNCs), spin-offs from
tertiary institutions and public R&D institutions are featured more prominently among this newer
wave of start-ups. Representative examples include Asian Manufacturing Online(AMO), a start-
up by a former staff of NCB providing electronic procurement network services to manufacturing
firms; a spin-off from a university (NUS) providing internet security technology; and a start-up
from a public institute (KRDL) providing Asian speech recognition technology. All three have
received substantial venture capital funding, and continued to invest in significant amount of
R&D.

The growing importance of technology development activities can be gauged not only in
terms of R&D statistics, but also in terms of patenting and revenue deriving new product or
process innovation. The total number of patents filed by Singapore-based organizations increased
from 142 in 1993 to 639 in 1998, while the numbers actually granted increased correspondingly
from 52 to 152. In 1997, revenue derived from commercialized products and processes
attributed to R&D performed in Singapore amounted to 9.6% of total revenues of the R&D-
performing companies.

Technology Deployment

In terms of technology deployment activities, while there are no simple overall statistical
measures of the intensity of activities by organization, various indicators of adoption of new
technologies strongly suggest that all major sectors of the Singapore economy are intensifying
their technology deployment efforts. For example, in the adoption of IT and internet
technologies, Singapore has achieved a high rate of diffusion by international standards (Wong,
1998). Similarly, in the intensity of adoption of advanced manufacturing technologies such as
CNC machines and robotics, Singapore also ranked quite highly (SIAA, 1996 and UNEC, 1997).
It is true that the pace of technology deployment has generally been higher among large firms in

10
general and MNCs in particular, with local SMEs still lagging behind. However, with the spread
of internet technologies and the rapid growth of local start-ups in recent years, the pace of
technology deployment among local SMEs is expected to accelerate in the future.

It is important to note that the government sector has consistently been very aggressive
users of technology, especially information technology. Indeed, many of the major public
statutory bodies in Singapore have become lead users of technology not just in Singapore, but
probably the world as well. For examples, the national airline (Singapore Airlines), the national
port authority (Port Authority of Singapore), and the national airport (Changi International
Airport Services) have all achieved world-class excellence in services quality. Similarly, before its
privatization, Singapore Telecoms was a very fast adopter of new telecommunications
technologies, resulting in Singapore having one of the most advanced telecommunications
infrastructure deployment in the Asia-Pacific region. Although these services firms performed
relatively little R&D, they are among the most aggressive investors in deploying new technologies
to improve their cost competitiveness and service quality edge. The same aggressiveness in
deploying new technologies has generally been pursued by the public sector at large. For
example, the Ministry of Environment was among the first in Asia to adopt incineration
technology for waste disposal, while the Ministry of Communications was the first in Asia to
deploy electronic road pricing (ERP) to regulate traffic flow. Singapore was also among the first
in the world to automate trade document submission and approval using EDI.

4. The Role of Public S&T Policy in the Development of Singapore’s NIS

4.1 Historical overview of science and technology policy in Singapore

Public policies have played a major role in shaping the development of Singapore’s
National Innovation System over the last four decades. However, until the late 1980s, much of
the public policy influence did not take the form of the narrow S&T policy instruments as defined
in Section 2.4 earlier, but were subsumed under more general economic development policies and
programs to facilitate industrial growth and upgrading. Indeed, until 1991 Singapore did not
even have a formal institution to develop and implement science and technology policy. A
Ministry of Science and Technology was formed in 1968, but its role was marginal, and it was
closed in 1981. Most of the Ministry’s duties were passed to the Singapore Science Council
(SSC), established in 1967. However, the role of SSC was quite limited, and mainly of an
advisory nature; most implementation programs were in practice carried out through the various
implementation agencies within the Ministry of Trade and Industry (MTI) and the Ministry of
Education. It was only when the SSC was re-organised in 1991 to form the NSTB that an overall
organizational framework for integrated science and technology policy implementation was
established.

Despite the lack of a formal S&T ministerial organizational framework for much of the
period up to the end of the 1980s, it is fair to say that technological upgrading had been a central
focus of much of the economic policy making of the Singapore government, even if the policy
instruments used were not explicitly labeled as such. The political leadership had always
displayed a clear understanding of the importance of technological upgrading in sustaining
economic growth, but until the late 1980s, the conviction was that Singapore should focus her
resources to exploit available technology from advanced countries rather than on creating her
own technologies. This policy focus on promoting the deployment of technology was evident
throughout the 1970s and 1980s.

11
 For example, in the aftermath of the sharp 1985 recession, a high level Economic
Committee was formed to chart a strategy for economic recovery. In the strategic document
produced by this committee (called The Singapore Economy: New Directions), the policy focus
on promoting technology deployment was explicitly stated as follows: “our goal should be to
achieve higher value-added, not high technology per se” (MTI 1986 p. 147). Similarly, in the
formulation of the National Information Technology Plan (NITP) in 1985 and the National
Automation Masterplan in 1988, the over-riding goal was to promote the diffusion and utilization
of IT and advanced manufacturing technologies to boost productivity. Even though both plans
called for some modest investment in public R&D institutions (establishment of the Information
Technology Institute (ITI) as an R&D arm under the National Computer Board(NCB) and
expansion of the GINTIC Institute for Manufacturing Technology (GIMT)) , they were geared
primarily in providing R&D support to the technological upgrading needs of industry.

The strong public policy focus on promoting technology deployment did not entirely
preclude the promotion of R&D. Indeed, as early as 1980, the national budget for the first time
provided tax incentives for manufacturing companies who undertook R&D in Singapore and the
R&D institutes who worked with them. An Initiatives in New Technology scheme was
established in 1984 which made loans available for the partial or full-funding of research projects,
even though its primary objective was to allow companies to receive subsidies for sending their
staff to training programs in high technologies such as robotics, microelectronics, IT,
biotechnology, optical and laser technology, engineering science and materials science (Chng
et.al.1986). Notwithstanding such early policy initiatives to encourage private R&D activities,
the level of public commitment to R&D investment remained low right through the 1980s.

The first significant recognition of the importance of R&D came in 1989 when a
Committee of Ministers of State was formed to outline the long-term strategy and direction of
Singapore’s development. The result was “The Next Lap”, which highlighted the need to focus
on R&D and specialising in high-tech niches (Government of Singapore, 1990). The importance
of innovation gained considerably more recognition in the Strategic Economic Plan formulated in
1991 (MTI, 1991) compared to the 1985 report. By the time the Committee on Singapore’s
Competitiveness (CSC) released its report in 1998 in response to the Asian crisis, the shift of
emphasis towards technological innovation has become the central theme: how to accelerate
knowledge-based industry development and technopreneurship have become the cornerstone for
Singapore’s future development strategy. More recently, the announcement of the
Technopreneurship21 strategy further intensified government’s focus on nurturing local high tech
start-ups.
4.2 The Changing Role of Public R&D Institutions

Compared to Korea and Taiwan, Singapore traditionally had a much smaller public R&D
sector. For a long time, public R&D were concentrated at the National University of Singapore
(NUS) - the only university in the country until early 1990s - and the Singapore Institute for
Standards and Industrial Research (SISIR) formed in the 1970s. Only since the late 1980s were
more public research institutes set up. Table 8 shows the rapid growth of the public research
institutes and centres (PRICs) since the late 1980s both in terms of number and R&D spending.
Over 1990-97, R&D spending by PRICs grew nearly 7-fold, faster than the four-fold increase
experienced by private R&D. By 1997, the 15 PRICs accounted for close to S$300 million of
R&D spending.

12
 The primary functions of these PRICs were to develop the applied technological
capabilities that are critical to support the major industrial clusters already in existence in
Singapore. In addition, some of the institutes were given the task to develop core competencies
in new generic technologies (e.g. IMCB in molecular and cell biology, CWC in wireless
communication technologies) that are needed to attract and grow new high-tech industries that
were non-existent in Singapore at the time. Despite this, and the fact that most of the PRICs had
begun to shift their R&D portfolios from more downstream applied R&D to more upstream
R&D, it remains true that Singapore’s PRIC system at the end of the 1990s is still geared
primarily towards applied R&D.

Although not expanding as fast as PRICs and private sector R&D, the tertiary institutions
(the two universities and four polytechnics) had nonetheless still seen their R&D spending more
than doubled over 1990-97, reaching S$278 millions in 1997. While the R&D portfolio of the
two universities were supposed to be more skewed towards basic R&D, in reality they were
under great pressure to do more applied R&D for industry as well. While international journal
publications still remained the key performance evaluation criteria for university academic staff,
the extent of licensing of technologies to private sector, and the number of R&D collaboration
with industries were two indicators used to monitor the relevance of R&D by tertiary institutions.

4.3 The Changing Role of Manpower Development Institutions

As documented by Soon(1992), Wong(1995b) and others, public policies have played an

important role in technical manpower development. Indeed, Singapore has arguably one of the
most well developed system of industrial and vocational training which made possible the rapid
transformation of Singapore’s unskilled workforce into a highly skilled one over a short period of
two decades. While high investment in primary and secondary education had been critical in the
long term development of Singapore’s manpower, the immediate task of industrial skills
upgrading needed to be performed by the establishment of vocational and technical training
institutions. In Singapore, the early development of a whole host of industrially relevant
vocational training programs under the Institute for Technical Education (ITE) had been
recognized as an important source for basic industrial skills upgrading in the industrial take-off
phase. In the second phase of industrial development sustained by growing adaptive capabilities
of workers and technicians, public manpower development policy shifted to more advanced skills
training, through the establishment of an extensive range of specialized industrial training
programs by the Economic Development Board (EDB) in areas such as computer numeric
control (CNCs). precision machining, tool and die making, and robotics. A distinguishing feature
of many of these technical training programs is that they were established and run as a
collaborative venture between EDB and reputed overseas partners, either in the form of
well-known MNCs (e.g. Philips, ABB and Seiko), or highly-regarded industrial training institutes
(e.g. the French-Singapore Institute (FSI) is in cooperation with the French Electrical/Electronic
Industry Federation, while the German-Singapore Institute (GSI) is in cooperation with the
German Agency for Technical Cooperation).

In the third phase of rapid expansion of innovative capabilities, some of the existing
industrial training programs were upgraded in content (e.g. both FSI and GSI were upgraded and
absorbed into the polytechnics system). At the same time, a number of specialized technical
training programs have been established, including the Institute of Systems Science (ISS), the
Information Communications Institute of Singapore (ICIS), the Japan Singapore Artificial
Intelligence Centre (JSAIC) and the Automation Application Centre (AAC).

13
 The changing manpower development emphasis of public policy over the last 20 years can
be clearly seen in Table 4 earlier, which tracks the growth in average annual output of tertiary
technical manpower. While polytechnics manpower output grew fastest in the 1980s, it is
university degree graduates that grew fastest in the 1990s. In addition to the outputs of these
public manpower development programs, there were also a large number of part-time tertiary
diploma and degree programmes operated in Singapore by various overseas universities on a
"distance learning" basis. However, most of these programs were concentrated in the
non-technical fields, with the result that the aggregate number of technical graduates from these
private programs was still relatively small, and confined largely to IT-related fields.

To supplement the limited manpower supply from within Singapore, the government has
also adopted a very liberal immigration policy to attract relevant talents from overseas. While the
focus of this foreign talent policy was initially centered on allowing MNCs to bring in relevant
expatriate managerial and technical expertise to oversee the start-up of new MNC operations, it
quickly widened to attracting a wide range of technical and allied professionals to staff the
subsequent operations of these MNCs. Since the late 1980s, as the country embarked on R&D
expansion, the government increasingly focused on attracting foreign scientists and engineers to
work in the various PRICs.

4.4 The Changing Public Policy Roles in Promoting Linkages among Innovation Sectors

As pointed out earlier, the extent of linkages and interaction among innovation sectors is
an important determinant of the performance of national innovation system. In the case of
Singapore, public policy on the whole appears to have played a significant role in promoting such
linkages, but the effectiveness of such policies appear to have been uneven, with evident gaps in
certain linkages when compared to the advanced countries.

The linkages that have been most actively promoted by public policy were those between
MNC subsidiaries operating in Singapore and their parent companies or associates overseas. The
principal devise that the government used is the offering of various investment incentives that are
tied to the introduction of higher value added operations or that help develop higher level of core
capabilities of local staff. The government also offered training incentives for MNCs to send
Singaporean engineers to acquire new technical skills at their headquarters.

The linkages between the enterprise sector and the manpower development sector,
particularly at the polytechnics and industrial training level, had also been quite strong. Indeed,
the close consultation with industry and the anticipatory planning and fast response of the
government to establish industrial training programs to meet the technical manpower needs of the
industry has been cited as a very important contributing factor in the rapid industrialization of
Singapore over the last three decades (Soon, 1993). The government did not hesitate to recruit
foreign expatriates with significant MNC experiences to head new industrial training institutes.
Indeed, some of the early industrial training institutes were run jointly by MNCs to establish a
good reputation of their programs.

The linkages between the public R&D institutions sector and the tertiary manpower
development sector appear to be adequate. Firstly, academic staff at the universities and
polytechnics hold the dual function of R&D as well as teaching, and hence much of their research
findings can be readily transferred into the teaching curriculum by the lecturers and professors

14
themselves. Secondly, most of the PRIs and PRCs have actually been housed within the
universities, and many of the leaders of R&D programmes at these PRICs are drawn from the
academic staff of the universities.

In contrast, the linkages between the public R&D institutions and the enterprise sectors
have been less well developed until the late-1990s (Wong, 1999c). To encourage R&D
collaboration between industry and PRICs, the National Science and Technology Board (NSTB)
had set informal targets for the PRICs to recover a certain proportion of their R&D expenditure
from external funding from industries. In addition, NSTB also monitored the performance of the
PRICs in terms of extent of patenting, licensing of technologies to private industries, and joint
R&D activities with private companies. However, because of the evident gestation time for most
of these PRICs to establish their distinctive core capabilities, the extent of linkages between
PRICs and private industries only began to increase rapidly over the last 3-4 years. Partly for
proprietary reasons, many MNCs still looked towards their corporate headquarters and associate
companies world-wide for their technological needs. In addition, they had preferred to tap the
various R&D subsidy schemes offered by NSTB (e.g. RDAS and RISC) for largely in-house
R&D where they could own the intellectual property generated.

Inter-firm innovation linkages within the enterprise sector had traditionally been rather
weak as well, but the situation has been improving rapidly since the late 1980s, particularly with
regards to linkages between local supporting industries and their MNC buyers. A number of
studies (Wong 1992, 1999d) indicated that the supplier-buyer relationship between the local
supporting industries and their MNC buyers had contributed significantly towards inducing
technological development among the former. This happened less through the unilateral efforts of
the MNCs to transfer technology to their vendors and suppliers, but more through processes of
indirect exposure and disclosure of technological information to suppliers. Moreover, the
existence of a long-term supplier-buyer relationship helped to reduce the perceived market risks
of investing in new technology by the suppliers, and thus contributed to inducing a higher
propensity to invest in new technologies by the local supporting industries.

Various studies (Wong 1999d and Soon1993) had indicated that the government played
an effective role in facilitating the innovation links between MNCs and their local supporting
industries, through programs like the Local Industry Upgrading Program (LIUP). For example,
Wong(1999d) documented how the LIUP program implemented by EDB had contributed
towards the rapid technological development of local precision engineering firms that supplied to
the major magnetic hard disk drive MNCs. More recently, through the strategy of Industry
Cluster development, EDB had facilitated the formation of joint ventures and technology strategic
alliances between Singaporean firms and major foreign MNCs in a number of high tech industries,
including semiconductor wafer fabrication and chemicals.

In contrast to innovation linkages between MNCs and their local suppliers, inter-firm
innovation linkages among local firms had been much weaker. Indeed, there has been few cases
of reported joint R&D among local firms, and the kind of R&D consortia found in Taiwan and
Japan have been largely absent in Singapore. There had also been few reported cases of
industry-wide or multi-firm collaboration in technology deployment. In this regard, there appears
to have been inadequate public policy attention in Singapore to promoting innovation
collaboration among local enterprises. Despite the emergence of some recent attempts at
promoting R&D consortia by some of the PRICs (e.g. IME and DSI), the extent of such inter-
firm collaboration in Singapore still pales in comparison to countries like Taiwan and Finland.

15
4.5 The Changing Institutional Framework for S&T Policy Coordination

As suggested by our framework for national innovation system analysis, one of the key
challenge for national S&T policy is to ensure coordination between S&T policies and other
broader economic development policies on the one hand, and coordination among different S&T
policies on the other. As pointed out earlier, the institutional framework for coordinating S&T
policy making and implementation in Singapore has undergone considerable changes over the
years, but the key principle by which the Singapore government appears to have adopted in
designing institutional framework for coordinating S&T policy appears to have stayed constant –
namely, to simply subsume S&T policy making and implementation largely within one ministry,
the Ministry of Trade and Industry (MTI), which is the ministry most directly responsible for
promoting economic development. By subsuming S&T policy under MTI, not only is
coordination between the content of S&T policies and other economic policies greatly simplified,
more importantly, the coordination of policy implementation had been greatly facilitated. Indeed,
I believe that it is this institutional arrangement that had given such a strong coherence to the
various policies in support of national innovation system development in Singapore. On the other
hand, this strong industry orientation may have also been inimical to developing longer term S&T
capabilities that may confer truly breakthrough technological leadership.

Figure 3 shows the basic institutional framework for coordinating S&T policies in
Singapore that has emerged in the late 1990s. As can be seen, with the exception of the Ministry
of Education (MOE) which oversees public education at all levels as well as funding of basic
research at universities, the other major agencies responsible for promoting economic
development --- the Economic Development Board (EDB), the Productivity and Standards Board
(PSB), the Trade Development Board (TDB) and until very recently, the National Computer
Board (NCB) – are all under MTI together with the National Science and Technology Board
(NSTB).

Virtually all the major policy initiatives to promote the development of Singapore’s
national innovation system as described earlier fall under one or more of these agencies within the
MTI. Besides EDB, TDB and PSB whose functions fall naturally within trade and industry
development, MTI also oversaw the National Computer Board (NCB) and the National Science
and Technology Board (NSTB). NCB was originally established under the Ministry of Finance in
the early 1980s to promote computerization in both the public and private sectors in Singapore.
By the mid-1980s, with the formulation of a more comprehensive National IT Plan (NITP), NCB
became the lead agency to implement the plan, and its role was thus expanded to include the
promotion of IT industry, the development and training of IT professionals, and the promotion of
IT culture and awareness among Singaporean. In the late 1980s, NCB expanded its mission
further by establishing an R&D arm, and its IT industry promotion and manpower development
roles further expanded, resulting in the agency being transferred to MTI for better coordination.
In the early 1990s, another new IT plan called IT2000 was formulated, which called for the
establishment of a broadband national information infrastructure (NII) to propel the island
economy into an "intelligent island" by the year 2000. NCB was put in charge of spearheading the
implementation of the IT2000 plan.

The decision to establish the National Science and Technology Board (NSTB) in 1991
within MTI further reflected the strategic intent of the government to make R&D policies
industrially driven. NSTB was established with the mandate to plan and manage the development

16
of PRICs as well as to design and implement various programs and incentive schemes to promote
private sector R&D. In addition, the board was entrusted the tasks of promoting R&D
manpower development, plan and manage the development of S&T infrastructures such as
science parks and incubators, as well as to introduce policies to promote an environment
conducive for innovation. In its first five years of operation (1991-95), NSTB was given a S$2
billion R&D fund to promote R&D in Singapore; this was doubled to S$4 billion for the second
five-year period (1996-2000).

Reflecting the applied, industrial orientation of the S&T policies and programs of NSTB,
the first National Technology Plan (NTP) formulated by NSTB for the first five years of its
operation (1991-95) did not even include the word ‘Science’ in its title; it was only for the second
5-years (1996-2000) that a National Science and Technology Plan (NSTP) was articulated with
full recognition of the importance of science. Even then, the key focus of the second NSTP still
remained one of promoting short to medium term technological development; as can be seen from
Figure 4, the NSTP envisaged the bulk of NSTB funding programs to go towards building near to
medium term technological leadership for Singapore-based industries. Funding for longer-term
R&D had to be justified on the ground of strategic economic relevance. In the monitoring of
performance of PRICs, there is a strong element of using external financing as one indicator of
the industrial relevance of the R&D being performed.

It is true, however, that there has been some spreading of S&T policy related
responsibilities to other ministries over the last two years. Thus, a new Ministry of Manpower
(enlarged from the pre-existing Ministry of Labour) was established in 1997 to better coordinate
manpower development policies, thus taking over some of the industrial manpower development
function that had been performed by EDB in the past. Three other ministries are also expected to
have growing influence over S&T development in the future. First, the Ministry of Defence,
which has a considerable budget for defence-related R&D, will be increasingly looking at dual-use
technologies, and hence need closer coordination with NSTB and private sector R&D. Second,
in response to the growing convergence between communications and information technologies,
the Ministry of Communications and IT has recently been formed to take over NCB from MTI to
better synergize the IT promotion functions and the telecommunications regulatory functions.
Finally, with the growing importance of life sciences and healthcare industry, greater coordination
will need to be developed between the Ministry of Health and MTI in both industry and
technology development for healthcare.

It is important to note that, besides subsuming S&T policy largely within MTI, the
Singapore government has adopted the interesting mechanism of setting up ad hoc high-level
inter-ministerial committees from time to time to formulate strategic action plans in response to
perceived major external challenges or opportunities. The 1986 “New Directions” Action Plan
(following the 1985 recession), the 1991 Strategic Action Plan (SEP) (following the formulation
of “the Next Lap” vision statement), and the 1998 CSC Action Plan (following the Asian financial
crisis) are the prime examples of such ad hoc strategic action plans. It is through such strategic
action plans that the contexts and impetus for new S&T policy initiatives get defined. In this
regard, Singapore is distinctly different from most other developing countries in that there is no
regular five-year economic development plans; rather, the system is much more flexible, with new
strategic responses formulated and implemented as and when appropriate in order to maximize
speed of action to cope with unexpected threats or to capitalize on emerging opportunities.

17
 Last, but not least, while the other ministries do not directly shape government S&T
policies, most if not all have an active policy to deploy new technology to enhance the
performance of the government agencies under their jurisdiction. As mentioned earlier, all the
government agencies involved in the provision of public infrastructures have been aggressive in
deploying new technologies. Such aggressive adoption of new technology represents part of the
overall "total business hub" strategy of the government to ensure that the public sector
contributes to the productivity of the Singapore economy by providing "world-class" services.
However, because of the strong emphasis on exploiting new but available technologies, there may
have been an inherent bias against pioneering new technologies through pursuing own R&D. In
other words, in the classic “make vs. buy” choice, the policies of some of these government
agencies may have slanted towards procuring proven, available technologies from foreign
technology suppliers, rather than supporting the development of new but unproven technologies
by indigenous firms, especially small local technopreneurial start-ups.

4.6 The Emerging Focus on Technopreneurship

Several factors are likely to have prompted the political leadership to re-think the viability
of the existing model of economic development that has brought so much success to Singapore.
First and foremost, the recent Asian financial crisis, which had led to a drastic slowdown in
economic growth in 1998 and early 1999, had raised concerns about the need to diversify the
sources of growth for Singapore beyond the regional economies. However, to achieve greater
penetration of European and North American markets clearly require Singapore to have a higher
technological competitive edge in such sophisticated markets. Secondly, looking at the way the
regional neighbors had devalued their currencies, Singapore will be subject to even greater cost
competitiveness pressure after the regional economic recovery. To stay competitive without
lowering the standards of living, Singapore needs to widen her technological edge vs. her regional
competitors. Last, but not least, the political leadership had evidently become increasingly
convinced of the Silicon Valley model of high tech innovation (including the successful Israeli and
Taiwanese variants) as the key to success in the global knowledge-based economy of the 21st
century.

Considerations such as the above have led to a new, emerging consensus among the
political leadership that Singapore needs to supplement the MNC leveraging model of
technological development with another model based on nurturing technopreneurship. First
articulated by the deputy prime minister, Dr. Tony Tan, in late 1998, the focus on promoting
knowledge-based start-ups had gained considerable momentum since with the establishment of
another high-level inter-ministerial committee to formulate a new Technopreneurship Strategy for
the twenty-first century (T21 for short). Perhaps more than the other economy-wide strategic
action plans before it, the T21 action plan (which will be progressively announced over the
second half of 1999), is likely to lead to very significant changes in S&T policy directions in the
future. Already, it had led to not only a major restructuring of the mission and organization of
NSTB, but also the announcement of changes to a wide range of existing business regulations
that are found to stifle local start-ups. These include changes to the existing bankruptcy laws,
revision of existing regulations and taxation rules governing company stock options, and new tax
offset provision for loses incurred by business investors in local high tech start-ups. The
establishment of a new public US$1 billion technopreneurship fund to stimulate the development
of Singapore as a regional venture capital hub had also been announced. The breadth and
comprehensiveness of the policy changes being proposed or under consideration clearly shows
that the government is again taking a holistic view of the technopreneurship challenges, rather

18
than frame the response in narrow S&T policy terms. Thus, although the government may have
come to the realization of the importance of promoting local technopreneurship somewhat late, it
appeared to be moving quite decisively once the decision was taken to shift direction

5. Future S&T Policy Challenges: A Critical Assessment

The strong emphasis on promoting technological deployment has served Singapore

well over the past thirty years, and the increasing investment in R&D in the 1990s has certainly
contributed to deepening Singapore’s ability to support increasingly advanced manufacturing
industries and to attract increasingly knowledge-intensive businesses as the new millenium
approaches. However, going forward, I believe that Singapore’s national innovation system
needs to be transformed at an even faster pace than what has been achieved so far. To spur
such transformation, I believe the Singapore government needs to make significant changes in
her S&T policy. While the recently announced policy shift towards greater emphasis on
technopreneurship promotion under the T21 strategy is indeed a welcomed change from the
previous policy focus on leveraging technology transfer from MNCs, this broad policy shift by
itself is likely to be inadequate by itself. In particular, I believe that four supporting S&T
policy changes need to be made to complement the T21 strategy. First, the government needs
to intensify the nation’s investment in R&D activities to levels comparable to the advanced
industrial countries. Second, this intensification of R&D investment must be accompanied by
a significant shift in the focus from incremental, applied R&D to more basic research. Third,
new policy making capabilities need to be developed to enable the innovative introduction of
new policies and programs. Last, but not least, significant changes in the existing
implementation institutions as well as the development of new institutional mechanisms may be
needed to overcome old mindsets and habits that will otherwise impede the effective
implementation of new policies. I briefly elaborate below each of these four proposed policy
changes.

5.1 Intensification of R&D investment

Despite the steady growth in R&D investment intensity in recent years as reflected in
the gradual increase of GERD/GDP ratio from less than 1% in 1990 to 1.65% in 1998,
Singapore’s R&D investment intensity remains low not only by the standards of the advanced
industrial countries (2.5-3%), but also when compared with the other Asian NIEs, Taiwan and
Korea (1.8-2.8%) (see Table 3 earlier). Given the smaller size of Singapore and the need to
achieve minimum critical mass in most areas of scientific and technological endeavors, it is
even more important for Singapore to increase her R&D budget to comparable levels of the
advanced industrial countries. In this regard, it is instructive for Singapore to look at how the
rapid growth in R&D intensity in small countries like Finland and Israel have contributed to
the remarkable improvement in their global competitiveness in key high tech industries in
recent years.

5.2 Shift Towards More Basic Research

Besides raising the overall level of R&D activities, there is an urgent need to shift more
resources towards the development of basic research capabilities. In contrast to the prevailing
strong emphasis on applied R&D that largely solves the current and immediate future needs of
industry today in an incremental manner, Singapore needs to emphasize more on the
development of basic research capabilities that can provide more radical or breakthrough

19
solutions, or that anticipate future problems of industries, including industries that are not
present in Singapore yet. It is through the tapping of such basic yet economically relevant
research capabilities that Singapore-based companies can hope to achieve more durable
competitive advantages in the marketplace. Without a concomitant investment in basic
research capabilities, the T21 strategy may run the danger of producing too many “me too”
type of technopreneurial start-ups that lacks technologically depth, and hence are likely to be
overwhelmed by global competitors. The leading regions of technopreneurial vitality in the
world, especially the Silicon Valley and Israel, invariably feed on wellsprings of leading edge
technologies which can only be generated by a strong focus on basic research capabilities.

Because industries are unlikely to invest substantially in basic research, the

development of basic research capabilities must remain a major responsibility of the public
sector, as is the case worldwide. In the context of Singapore, this means that the various
existing public research institutes/centres (PRI/Cs) needs to shift their R&D portfolio over
time towards programs with longer gestation but greater potential for high payoffs. More
importantly, there is a need to boost the budget for basic R&D in the local universities.
Despite having achieved significant progress as measured by Science /Engineering Citation
Indices and patenting statistics, the level of basic R&D funding at the two local universities in
Singapore remains significantly below those of the major state universities in the US like
University of California, Berkeley, not to mention the top private universities like Stanford and
MIT. An increase in basic R&D budget is also needed to attract top foreign talents, who in
turn can draw bright doctoral students and post-doctoral fellows to build critical mass.

5.3 Improving S&T Policy Making and Evaluation Capabilities

Despite the rapid increase in budget allocation for S&T development and major
expansions of public R&D institutions, there has not been a commensurate development in
S&T policy making and evaluation capabilities. While the lead time to train up a core of
indigenous S&T policy analysts with the specialist skills required (economics/policy science
combined with technical domain knowledge) may be a contributing factor, there may perhaps
be a tendency on the part of senior decision makers to underestimate the importance of policy
research. Moreover, there has also been less of a tradition in Singapore for independent,
formal evaluation of public policies and programs; instead, a combination of frequent
consultation with industry, benchmarking with best practice in leading countries, and setting of
clear performance objectives had been used to assess policy/program effectiveness. While
these practices have worked very well in the past, and should certainly remain key features of
the public policy evaluation framework, there will be a need to enhance the S&T policy
making and evaluation capabilities as the sophistication of policy instrument increases and the
lead-time/relationship between policy instrument and industry impacts become longer/more
complex.

5.4 Institutional Innovation

Major shifts in policy invariably call for significant changes in the missions and
organizational design of the institutions to implement the policy changes. Compared to most
other developing and newly industrializing countries, Singapore has so far displayed a
remarkable degree of adaptability of public institutions to respond to the changing needs at
different stages of economic transformation in the past. This adaptability has been aptly
attributed to the “strategic pragmatism” of the leadership by Schein(1996) in the case of one

20
institution, the Economic Development Board (EDB), but his analysis can probably be
extended to the entire public sector in Singapore in general. For example, in response to the
fast changing world of computer technologies, there has been many changes in the mission and
design of the National Computer Board (NCB) over the last 17 years, including the most
recent decision to merge it with another agency (the Telecommunications Authority of
Singapore (TAS)) under a new enlarged ministry (Ministry of Information and
Communications Technology (MICT)).

I believe that even more drastic changes in the institutional framework for promoting
the development of Singapore’s national innovation system will have to be made over the next
few years to re-align existing institutions and policies across different ministries to the new
mission of the T21 strategy. Indeed, one of the tasks of the Inter-Ministerial T21 Committee
is precisely to identify the major institutional changes needed. While the principle of
subsuming S&T policy making and implementation largely within MTI remains sound, more
complex coordination mechanisms will need to be established to align the long term strategies
of NSTB and other agencies within MTI with those of the Ministry of Education, the Ministry
of Manpower, the Ministry of Communications and IT, and the Ministry of Health. For
example, while the government, through EDB, should rightly continue to pursue the strategy
of inviting world class universities to establish operations in Singapore to build Singapore into
a world-class knowledge hub, this strategy needs to be synergized with the vision of the
Ministry of Education to build the local universities into world class institutions.

Besides formal organizational changes and the setting of new directions by the top
management, however, it is also important to recognize the need to change the mindsets and
habits of the rank and file involved in the day-to-day implementation. An institutional culture
that is used to responding to the needs of large MNCs and promoting technology deployment
cannot be transformed into one that stresses technopreneurial start-ups and basic research
overnight. New staff that bring with them different experiences, capabilities and perspectives
from the existing staff may be needed to hasten the cultural change. Another approach to
facilitate institutional change is to benchmark and adapt institutional innovations that have
been found to work well in other countries or regions that have achieved rapid
technopreneurial growths, e.g. the “Incubator Management Company” (IMC) model in Israel,
the entrepreneurial university model of Stanford University, and the R&D consortium models
in Taiwan and Finland.

6. Conclusion

Singapore’s national innovation system has undergone significant transformation over

the last four decades. This paper has described the key features of these transformations and
how public S&T policies have evolved and contributed towards such transformation over
time. From one focusing primarily on leveraging MNCs and promoting technology
deployment, the national innovation system of Singapore has deepened and diversified over
time. In recent years, it has evolved towards one where the fostering of technopreneurship
and the nurturing of R&D capabilities are gaining greater public policy recognition. The
recent announcement of the T21 strategy represents a bold vision that will certainly accelerate
these emerging trends, but its successful implementation is likely to call for major changes in
existing S&T policies and institutions. This paper has sought to identify some of these major
policy and institutional changes.

21
 In seeking to translate the T21 strategy into specific policies and institutional changes,
Singapore can do well to study the experience of other technologically advanced countries.
However, while certain elements of the institutional models that have worked well in other
successful places like the Silicon Valley, Finland or Israel can be borrowed and adapted,
wholesale duplications are unlikely to be possible because a national innovation system evolves
in a path dependent manner and needs to be sensitive to the unique endowments of each
country (Nelson 1993). In the final analysis, therefore, the key S&T policy challenge for
Singapore is to evolve her own unique vision of how a small country can compete in global,
knowledge-intensive industries through a judicious balance of leveraging MNCs vs. fostering
technopreneurship, and promoting technology deployment vs. nurturing technology creation.
Or to borrow the terminology of Roemer(1992), the two paths to economic development –
using vs. producing ideas – need to be increasingly integrated to create a virtuous cycle.

22
References

Amsden, A.1989. Asia’s Next Giant: South Korea and Late Industrialization, Oxford Univ.
Press.

Chng, M.K., Low, L., Tyabji, A., Tay, B.N. (1986), Technology an Skills in Singapore,
Singapore: Institute of Southeast Studies

Dahlman,C.J. & O.Sananikone. 1990. "Technology Strategy in the economy of Taiwan:

Exploiting foreign linkages and investing in local capability", Wash.D.C.: World Bank, mimeo.

Dahlman,C. & L.S. Kim. 1992. "Technology policy for industrialization: An integrative
framework and Korea'.s experience", Research Policy, 21: 437-452

Dosi.G. et.al..l988. Technical Change and Economic Theory. London: Pinter

Economic Development Board (EDB), Singapore. EDB Yearbook, various years. Singapore:
EDB

Economic Development Board (EDB), Singapore. The Singapore Venture Capital Industry
Survey 1999, Singapore: EDB

Government of Singapore. 1991. The Next Lap. Singapore: Government of Singapore

Lundvall.A.K.(ed.) 1992. National Innovation System. London: Pinters

Ministry of Trade & Industry, Singapore. 1986. The Singapore Economy: New Directions.
Singapore: MTI

Ministry of Trade & Industry, Singapore. 1991. Strategic Economic Plan: Towards a
Developed Nation. The Strategic Economic Plan, Singapore: MTI

National Computer Board (NCB),Singapore. 1992. IT2000: Vision for an Intelligent Island,
Singapore: NCB

National Science & Technology Board (NSTB) 1991. National Technology Plan, Singapore:
NSTB

National Science & Technology Board (NSTB) 1996. National Science and Technology Plan,
Singapore: NSTB

National Science & Technology Board (NSTB), Annual Report (various years), Singapore

National Science & Technology Board (NSTB) 1998. 1997 National Survey of R&D,
Singapore

Nelson,R.R.(ed.) 1993. National Innovation System: A comparative analysis. New York:

Oxford University Press

23
OECD. 1993. Oslo Manual. Paris: OECD

OECD. 1997. “National Innovation System”. Paris: OECD

Porter,M.1990. Competitive Advantage of Nations, London: Macmillan

Roemer.P. 1992. "Two strategies for economic development: Using ideas vs. producing ideas,
World Bank Annual Conference on Development Economics, Washington D.C., April 30-May
1, 1992

Schein, E.1996. Strategic Pragmatism: The Culture of the Economic Development Board of
Singapore. MIT Press: Cambridge, Mass.

Singapore Industrial Automation Association (SIAA) 1996. National Automation Survey

1995/6 Report, Singapore: SIAA

Soon,T.W. 1992. "Human Resource Development and Management in Singapore", in

P.K.Wong and C.Y.Ng(eds.), Human Resource Development and Utilization in the Asia-
Pacific: A Social Absorption Capacity, Approach, Singapore: ISEAS, p.21-30

Soon, T.W. and C.S. Tan. 1993. "Singapore: Public Policy and Economic Development." The
Lessons of East Asia. Washington, D.C: The World Bank.

Suh,J.(1998), “OECD project on NIS in Catching Economies”, paper presented at the

Workshop on OECD Project on NIS in Catching Up Economies, Taipei, Taiwan, April 20-22,
1998

UNEC. 1997. World Robotics Statistics.

Wong.P.K. 1992. "Technological development through subcontracting linkages: Evidence

from Singapore". Scandinavian International Business Review, 1(3): p.28-40, 1992

Wong, P.K.,1995a. National Innovation System: The Case of Singapore, Seoul, Korea:
Science and Technology Policy Institute (STEPI), 1995, 49pp.

Wong, P.K.1995b. "Developing Technology Managers in Singapore: Issues and Challenges",

in K.Minden and P.K.Wong (eds.), Developing Technology Managers in the Pacific Rim,
New York: M.E.Sharpe, 1995, pp.62-92

Wong,P.K., 1998. “Leveraging the Global Information Revolution for Economic

Development: Singapore’s Evolving Information Industry Strategy”, Information Systems
Research (US), Vol.9, No.4, 1998

Wong,P.K., 1999a. “The Role of the State in the Industrial Development of Singapore”,
chapter in P.K.Wong and C.Y.Ng(eds.), Re-thinking the East Asian Development Paradigm,
(forthcoming)

Wong,P.K. 1999b, “National Innovation System for Rapid Technological Catch-Up by Small,
Late-Industrializing Economies”, Singapore: CMIT Working Paper

24
Wong,P.K.1999c. “University-Industry Technological Collaboration in Singapore: Emerging
Patterns and Industry Concerns”, International Journal of Technology Management, vol.17,
No.3/4 , 1999

Wong,P.K., 1999d. “The Dynamics of HDD Industry Development in Singapore”, San Diego:
Globalization of Data Storage Industry Project, Working Paper

World Bank. 1993. The East Asian Miracle: Economic Growth and Public Policy. New
York: Oxford University Press

25
26
 Figure 2 Changing Profile of Technological Capabilities of Singapore over the Four Phases of NIS Development

Relative Capability Level

Categories of
Capabilities Low High

Operating
Capabilit
y Phase I
Adaptive
Phase II
Capabilit
y Phase III

Innovative
Phase IV
Capability

Technoprenuring ?
Capability

Technology capability profile

Primary profile thrust in each phase

27
 Figure 3 Emerging Institutional Framework for S&T Policy in Singapore in the Late-1990s

Cabinet

National
Science & Ministry of Ministry of Other
Ministry of Ministry of Trade
Technology Health Defence Ministries
Education & Industry (MTI)
Council
(NSTC)
National
Higher Medical
Education DSO DTG
EDB NSTB NCB* PSB Research
Division Council

Public research Ad Hoc Committees:

institutes/centres • T21 Committee (1999-present)
Academic Universities Polytechnics (PRI/Cs) • Committee on Competitiveness (1997-98)
Research (2) (4) (14) • National IT Committee (NITC) (1981-present)
Fund • Economic Planning Committee (1985-86, 1989-91)

* Moved to the enlarged Ministry of Communications & Information Technology (MCIT) from July 1999

28
Figure 4 R&D Funding Priorities According to the National Science & Technology Plan (1996-2000)

29
 Table 1 Aggregate Economic Growth Performance, 1960-1998

% real growth p.a

1960-70 1970-80 1980-90 1990-98 1994 1995 1996 1997 1998
GDP 8.7 9.4 7.1 7.6 10.5 8.7 6.9 7.8 1.5
Productivity n.a 4.3 4.8 2.9 5.7 3.5 0.6 1.6 -1.3 p
1960 1970 1980 1990 1998 1994 1995 1996 1997 1998
GNP per capita (S$) 1,330 2,825 9,941 20,090 38,169p 32,454 35,151 36,852 39,310 38,169p
(at current prices)

Source: Calculated from MTI (1990), Yearbook of Statistics Singapore (1993) & (1997), Economic Survey of Singapore (1998)
p
Preliminary figures

Table 2 Singapore GDP Distribution by Sectors, 1960-1998 (%)

Industry 1960 1970 1980 1990 1994 1995 1996 1997 1998 p
Agriculture & Mining 3.9 2.7 1.5 0.4 0.2 0.2 0.2 0.2 0.1
Manufacturing 11.7 20.2 28.1 28.0 26.0 26.3 25.4 24.5 22.1
Utilities 2.4 2.6 2.1 1.9 1.6 1.6 1.6 1.7 1.7
Construction 3.5 6.8 6.2 5.4 7.0 7.0 7.7 8.2 8.6
Commerce 33.0 27.4 20.9 16.3 17.2 17.3 17.1 16.8 17.5
Transport & Communication 13.6 10.7 13.5 12.5 12.1 12.4 12.5 12.6 13.1
Financial & Business Services 14.4 16.7 18.9 25.5 25.7 25.5 25.7 26.2 26.7
Other Services 17.6 12.9 8.7 9.9 10.1 9.8 9.9 9.8 10.2
Total 100% 100% 100% 100% 100.0 100.0 100.0 100.0 100.0

Source: Calculated from MTI (1990), Yearbook of Statistics Singapore (1993) & (1997), Economic Survey of Singapore (1998)
Note: Figures may not add up to 100 due to rounding
p
Preliminary figures
 Table 3 Comparative R&D Indicators, Singapore and Selected OECD/Asian NIEs

Grouping Country Year R&D/GDP RSE per 10,000 Labour

(%) Force
Japan 1996 3.0 105
G-5 Germany 1996 2.3 58 (1995)
U.S.A 1997 2.6 na
U.K 1996 2 56 (1995)
France 1995 2.4 60 a
Switzerland 1996 2.8 52
Sweden 1995 3.1 59a (1991)
Industrialized Netherlands 1995 1.2 46 a
Small Denmark 1995 1.8 57 a
Countries Norway 1995 1.8 73 a
Australia 1996 1.4 na
a
New Zealand 1996 0.9 35 (1995)
Korea 1996 2.8 62
Asian NIEs Taiwan 1996 1.9 58
Hong Kong 1996 0.3 na
Singapore 1997 1.5 60

a
Researchers per 10,000 labour force
Source : National Science & Technology Board, STI Outlook 1996 & 1998, APEC/PECC Pacific S&T profile,
1995, Far Eastern Economic Review (May 14, 1998), Science & Engineering Indicators 1998, and various
national sources

Table 4 Average Output of Technical Manpower from Tertiary Education Institutions in

Singapore, 1970-1997 (No. per year)

1970-79 1980-84 1985-89 1990-93 1994-97

University level 680 1,040 2,160 2,940 3,720
Polytechnic levela 1,520 2,460 4,840 6,420 7,360
Total 2,200 3,500 7,000 9,360 11,070

a
Includes diploma courses from ISS
Calculated from : Singapore Yearbook of Labour Statistics (various years), Singapore Yearbook of Manpower
Statistics 1997
 Table 5 Growth Trend of R&D in Singapore, 1984-1997

Year GERD GERD/GDP RSEs RSE/10,000 labour

(S$m) (%) force
1978 37.80 0.21 818 8.4
1981 81.00 0.26 1,193 10.6
1984 214.30 0.54 2,401 18.4
1987 374.70 0.86 3,361 25.3
1990 571.70 0.84 4,329 27.7
1991 756.80 1.00 5,218 33.6
1992 949.50 1.17 6,454 39.8
1993 998.20 1.06 6,629 40.5
1994 1,174.98 1.09 7,086 41.9
1995 1,366.55 1.13 8,340 47.7
1996 1,792.14 1.37 10,153 56.3
1997 2,104.56 1.47 11,302 60.2
1998 p 2,330 1.65 12,810 66

p
Preliminary figures by NSTB
Source : National Survey of R&D in Singapore (various years), National Science & Technology Board

Table 6 Number of Organisations Performing R&D, 1978-1997

Year Private Sector Higher Government Public Research Total

Education Sector Institutes
Sector
1978 63 4 23 a - 90
1981 135 4 38 a - 177
1984 143 4 20 a - 167
1987 191 4 20 a - 215
1990 266 5 4 7 292
1991 311 5 9 6 331
1992 331 5 13 5 354
1993 410 6 15 5 436
1994 427 6 16 5 454
1995 440 6 14 10 470
1996 496 6 11 13 526
1997 508 6 14 15 543

a
Figures include public research institutes. Definition of government R&D organisations was changed from
1990 onwards, resulting in a smaller number of organisations being counted.
Source : National Survey of R&D in Singapore (various years), National Science & Technology Board
 Table 7 R&D Expenditure by Sectors, 1978-1997

Year Private Higher Government Public Research Total

Sector ($mn) Education Sector Sector ($mn) Institutes ($mn) ($mn)
($mn)
1978 25.5 8.2 4.1 - 37.8
1981/82 44.2 24.3 12.5 - 81.0
1984/85 106.7 69.6 38.0 - 214.3
1987/88 225.6 95.4 53.7 - 374.7
1990 309.5 119.7 99.4 43.1 571.7
1991 442.1 147.1 96.8 70.8 756.8
1992 577.6 156.0 105.0 110.8 949.5
1993 618.9 157.3 106.5 115.5 998.2
1994 736.2 179.5 142.1 117.2 1175.0
1995 881.4 193.4 110.4 181.4 1366.6
1996 1133.4 238.7 166.8 253.2 1792.1
1997 1314.5 277.7 216.1 296.2 2104.6
1978 67% 22% 11% - 100%
1984/85 50% 32% 18% - 100%
1990 54% 21% 17% 8% 100%
1991 58% 20% 13% 9% 100%
1992 61% 16% 13% 12% 100%
1993 62% 16% 11% 12% 100%
1994 63% 15% 12% 10% 100%
1995 65% 14% 8% 13% 100%
1996 63% 13% 9% 14% 100%
1997 63% 13% 10% 14% 100%

Source : National Survey of R&D in Singapore (various years), National Science & Technology Board
 Table 8 Distribution of Private Sector R&D Expenditure by Industry, 1993-1997

Total R&D Spending by Industry ($mn) %

Industry Group 1993 1994 1995 1996 1997 1993 1994 1995 1996 1997
MANUFACTURING 502.1 580.0 729.7 1000.2 1110.1 81.1 78.8 82.8 88.2 84.5
Electronics 318.1 361.3 433.7 603.1 625.8 51.4 49.1 49.2 53.2 47.6
Chemicals 34.4 54.4 79.6 177.0 202.6 5.6 7.4 9.0 15.6 15.4
Engineering 104.1 123.2 171.7 168.8 208.7 16.8 16.7 19.5 14.9 15.9
Precision Engineering 69.5 93.1 131.8 120.6 148.8 11.2 12.6 15.0 10.6 11.3
Process Engineering 7.7 6.5 15.2 13.8 12.1 1.2 0.9 1.7 1.2 0.9
Transport Engineering 26.8 23.6 24.7 34.4 47.8 4.3 3.2 2.8 3.0 3.6
Life sciences 24.8 38.6 34.4 37.9 58.3 4.0 5.2 3.9 3.3 4.4
Light Industries/Other 20.8 2.4 10.3 13.4 14.6 3.4 0.3 1.2 1.2 1.1
Manufacturing
SERVICES 116.7 156.3 151.7 133.2 204.4 18.9 21.2 17.2 11.8 15.5
IT and Communications 20.0 23.9 41.6 103.8 134.5 3.2 3.2 4.7 9.2 10.2
Finance & Business 26.6 70.1 38.2 14.7 28.4 4.3 9.5 4.3 1.3 2.2
Other Services 70.2 62.3 71.9 14.6 41.5 11.3 8.5 8.2 1.3 3.2
ALL INDUSTRY 618.89 736.2 881.4 1133.4 1314.5 100.00 100.0 100.0 100.0 100.0
GROUPS

Source: National Survey of R&D in Singapore (various years), National Science & Technology Board
 Table 9 Foreign Companies' Share of Industry R&D Expenditure, 1993

Year Share in total private R&D (%)

1993 67.6
1994 74.5
1995 64.3
1996 67.0
1997 61.2

Source : National Survey of R&D in Singapore (various years), National Science & Technology Board

Table 10 Foreign Companies' Share of Industry R&D Expenditure, 1997

(1) Foreign (2) Local majority (3) Total R&D (1)/(3)

majority owned owned companies Spending by %
Industry Group companies ($mn) ($mn) Industry
($mn)
MANUFACTURING 727.24 382.85 1110.09 65.51
Electronics 424.25 201.59 625.84 67.79
Chemicals 168.54 34.09 202.63 83.18
Engineering 94.78 113.92 208.70 45.41
Precision Engineering 74.62 74.2 148.82 50.14
Process Engineering 7.77 4.33 12.10 64.21
Transport Engineering 12.39 35.39 47.78 25.93
Life sciences 36.81 21.53 58.34 63.10
Light Industries/Other 2.86 11.72 14.58 19.62
Manufacturing
SERVICES 76.60 127.84 204.44 37.47
IT and Communications 47.69 86.85 134.54 35.45
Finance & Business 12.61 15.8 28.41 44.39
Other Services 16.30 25.19 41.49 39.29
ALL INDUSTRY GROUPS 803.84 510.69 1314.52 61.15

Source : 1997 National Survey of R&D in Singapore, National Science & Technology Board