The project on university business incubation was launched by the Commission on Higher Education (CHE) according to the national policy to create 50,000 new entrepreneurs per year for the next 5 years. This report covers the work done by action research during a period of 9 months (January-September, 2005). During this period, CHE funded the establishment of 25 university business incubators (UBI) and set up the University Business Incubators Coordinating Office (UBICO). UBICO conducted various activities to meet its 3 areas of responsibility, namely (1) coordinating with the UBIs; (2) organizing activities for further development of university business incubation; and (3) drafting a 5-year master plan for university business incubation (2006-2011). This report also presents a draft law to establish a University Business Incubation Development Agency (UBIDA) as a public organization. It further proposes that CHE should proceed to have the draft law enacted. It should move to introduce legal amendments to allow civil servants in universities to hold senior management positions of newly formed enterprises and to provide tax benefits to private sector that supports newly form enterprises.