The Problem with Buddies

 One of the most prominent items to be put on display as a result of the acquittal of Parti Liyani, the Indonesian maid who worked for Mr. Liew Mun Leong, the former Chairman of the Changi Airport Group, was the extent to which Singapore’s high-level businesses were connected.

Within moments of that rather damning verdict being made public and the explosion of anger towards Mr. Liew and the businesses where he was serving on proceeded to rush out and defend him in public. The most noticeable was our state-owned holding company, Temasek Holdings, which went out of its way to remind the public that Mr. Liew had contributed a lot to Singapore (which was an irrelevant point in light of the fact that Mr. Liew had very likely been involved in something where the legality was questionable). Why would such large organizations rush out to defend the reputation of a man whom had publicly been exposed for trying to illegally fix someone with so much less than him?

While I don’t have concrete answers for the individuals who defended Mr. Liew in public, the answer is probably because Mr. Liew was one of them and they were simply defending their own kind. This leads to one of the most problematic issues in Singapore – crony capitalism.

According to Transparency International, Singapore ranks as one of the top five least corrupt nations on the planet and it is the only Asian nation on the list. Lee Kuan Yew was very particular about ensuring that the public sector would be known for its integrity. His vision was for Singapore to be a shinning beacon of honesty in a rather turbulent neighborhood. He saw to it that there would be a stick for anyone of his public servants who had a whiff of corruption surrounding them (this is the man who gave a minister the choice of suicide or public humiliation) but at the same time he paid his public servants well (think of the world’s highest paid ministers). The system is seemingly good. As well as our ranking on Transparency International’s list, we are also praised by everyone else for having clean public administration. In Singapore, don’t even think about handing over a brown envelope with cash if you are dealing with any public servant.

There is, however, one slight problem to the Singapore system. While you cannot hand money to public servants, knowing people seems to work in business deals, hence while we may rank highly and alongside the Nordic Countries in terms of corruption, our ranking in the index of crony capitalist is closer to that of our neighbors and that bastion of honest government – Russia. Our ranking on the crony scale can be found at:

What’s particularly noticeable about this list is the fact that the “crony industries” or the industries where knowing people is an essential part of the game form a particularly large chunk of our economy. These would be things like construction, property and shipping.

The extent to which this was brought home to me came from a conversation I had with a director of company we had just put under. I told him that I didn’t understand how small subcontractors would make money. First you have to come up with vast amounts of cash to do the project. Then, at a certain stage, you send it a “progress claim” which is essentially telling your pay master what you think you should be paid. He (they usually are in construction) then has to verify the value of your work, and if he needs to keep the bean counters happy, its inevitable that he’ll find fault (in theory there’s a legal mechanism, in practice, the one holding the money is the one with the power). Once you agree to a price, then you send in an invoice and the credit terms are at least 60 days. I cannot comprehend how this power distortion makes it possible for small businesses to survive.  His reply was telling. He told me that I was looking at things as an outsider – the insiders always ensured there was a godfather inside the paying party’s organization that would take care of them.

There is, technically no corruption in Singapore. Yet, somehow contracts are inevitably awarded to the same people and since the industries like construction and property development inevitably involve large numbers of manpower and machinery, the sums we’re talking about are huge – hundreds of millions if not billions. If you study Singapore’s rich list, you’ll notice that the big fortunes are inevitably in one thing – property. It’s also a case of the same names coming up again and again.

Now, this is not particularly unique to Singapore. America’s rich list has also been pretty much the same. However, the American list isn’t in the industries that require you to have a “Godfather.” Gates, Bezos, Jobs and Buffet needed a vision and did create something different. Our guys built real estate and ensured that their profits would forever remain healthy.

While you cannot accuse anyone of dishonesty here, the hold of these industries and the practice of needing “Godfathers” to protect you cannot be healthy in any shape or form. Innovation for one, is never encouraged. More worryingly, government becomes compromised in times of crisis. Just look at the explosion of Covid-19 cases in worker dormitories. The whole world knew that the conditions in the dorms was essentially a breeding ground for diseases. There were previous cases reported in the press. The Minister of Manpower herself admitted that the dormitories were simply not up to standard and more worryingly she admitted that the government had known about this for sometime but never made the moves to force the industry to clean up because the industry complained about rising cost.

What’s a little less spoken about was the fact that the dormitory owners had “Godfather’s” to look after them. Think Centurion Corp, which is admittedly one of the better run dormitories. The main characters were involved in the grassroots. The compromise, the government stepped in to pay for cash rich companies to make conditions livable. No matter how you spin it, it cannot be right for a government that prides itself in honesty, bailing out a cash industry to do what it should have done in the first place.

You can’t bribe people here but if you are in certain dominant sectors of the economy, you need to find a godfather to look after you. Sure, who you know is always important but it cannot be to an extent where who you know becomes a driving force in getting things done. We need to build up dynamic sectors, those with creative destruction rather than those which function on back scratching. It’s the only way we’ll progress to the next level.