Thursday, August 26, 2021

Be Like a Paralymian and Don’t Bubble Wrap Yourself

 Heng Swee Kiat, our Once-and-Never Prime Minister hit the nail on the head when he announced that it was not possible to “Bubble Wrap” the Singapore Worker from foreign competition. Mr. Heng made those comments at the National University’s 115th anniversary. A full report on Mr. Heng’s remarks can be found at:

https://www.straitstimes.com/singapore/politics/not-possible-to-bubble-wrap-singapore-workers-from-foreign-competition-heng

However, whilst he may have been correct in his comments, Mr. Heng was focused on the wrong target. Singaporean workers have been facing foreign competition for at least 10-years. Instead, he should have focused his energies on Singaporean businesses, particularly the ones owned or controlled (usually both) by the government. These names consist of the biggest names in Singapore’s economy and along with the “foreign investors,” have carved out a name for themselves in the building of Singapore Inc.

These businesses have become part of the landscape of the prosperous Singapore that the foreign investor community sees. However, in recent years, they’ve come to symbolize the problems that any future Singapore faces. As one of the leading observers on Singapore’s banking industry, Mr. Emanuel Daniel says:

https://www.emmanueldaniel.com/singaporeans-dont-deserve-piyush-gupta/

 


Mr. Daniel is by not a political liberal in any sense of the word and his comments on the performance of our large home-grown industries need to be examined. If Mr. Daniel is correct in his assessment on our large home-grown companies, it is a sign that the economic model that worked so well in the past is now floundering and if not restructured, will collapse.

Where do we start? Perhaps the best place, as with most developed economies, would be in stock exchange. In most places, the companies that make up the stock exchange index are the biggest and most prominent ones listed on that particular exchange. One can get a picture of what industries drive the national economy. So, in the case of Singapore, who are the guys who drive the economy. A list of the companies that make up the Straits Times Industrial Index (STI) can be found at:

https://www.sgx.com/indices/products/sti

The main point that comes to mind upon an initial glance of the companies that make up the STI index is the fact that of the 28 off companies that make up the index, roughly one third of them are glorified landlords. The rest is made up of the local banks, a few hard-industry players, a few retailers and the national airline.

On an individual level there is nothing wrong with being a landlord. It makes sense to own a property in land scarce Singapore, because if you look at the investment logic, it makes sense. Singapore is land scarce, so as the population increases in a limited space, logic has it that property prices will increase.

However, it’s a different story on a national level. The fact that landlords control such a high portion of the national wealth, indicates that most of nation’s money is doing nothing more than waiting for plots of land to appreciate rather than in the value-creating stuff (even commercial landlords need tenants with business in order to pay rents). With the exception of suing tenants who cannot pay, maintaining the property and tearing it down and building something new every two decades or so, landlords do not generate much activity that contributes to economic growth.

The second point to note, as Mr. Daniel alluded to in his blog piece is that the CEO of our major home-grown companies are more often than not, former civil servants or more specifically, military men. The official line has been that these civil servants are the best and brightest that the nation has to offer. These men (usually are) all scored impeccable academic results and were sent to the world’s best universities at the tax payer’s expense. The government calls sending these men into the private sector an act of “sharing talent.”

Only problem is that our scholars are “bubble wrapped” from any form of competition (foreign or otherwise) from the moment they leave university. For example, a Ministry of Education Scholar will only teach in a school of kids who are bright enough to succeed whatever you do. Once they go into business, it’s always in a monopoly like business.

How exactly does bubble wrapping help the national economy? How does it make Singapore a richer and better place? Well, if you look at a random selection of the companies that make up the STI index, Singapore is helped by losing share value. Take a look at the price history of some of our more prominent home-grown companies:

 


SingTel

 


SembCorp Industries

 


SembCorp Marine

 


 

Keppel Corporation

While the share price may not be indicative of everything related to the company’s underlying value, the fact that these companies have been managing a decline in share price over a five-year period is not a good sign. It gets even worse if you consider the fact that, stock markets around the world have been doing exceptionally well.

Bubble wrapping has not been good for our bosses. In the case of the companies mentioned, they managed decline of the share price in the last five years is considered relatively good if you consider the fact that there was less bubble wrap in these companies than in some other areas. SingTel, for example, may be bubble wrapped in Singapore (main growth coming from selling phone cards to maids) but it has had under previous management bought units in places where there was no bubble wrapping (think Optus in Australia and Bharti AirTel in India). These units have ensured that the business in Singapore sees increasing revenue.

A managed decline is relatively good when compared to the need to sell out. There was the example of the SMRT corporation, where a former CEO who was a former Chief of Defense Force became a hero to his shareholders by selling the company to the major shareholder. Then, there’s my favourite and often used example of Singapore Press Holdings (SPH) and MediaCorp, which lost money when they went into new businesses, cried to the government that the market was too small for competition, enjoyed a honey moon of remonopolisaiton sniping at each other and then were pushed into obscurity because people decided that they could get their news from elsewhere and the CEO of a Media company ended up becoming the butt of jokes because he took “umbrage” that he was asked a question that he was actually prepared for (SPH is listed and stock exchange rules require executives be prepared for all likely questions before they face the press).

To be fair to the Singapore government, it has got many things right. However, the efforts to bubble wrap bosses and monopoly businesses isn’t one of them. Singaporeans should never expect to be like the bosses of these old monopolistic companies. Instead, they should be more like Ms. Yip Pin Xiu, a Paralympian who has won four gold medals in three Paralympic games (2008 Beijing, 2016 Rio and 2020 Tokyo). Ms. Yip is not bubble wrapped. She goes out of her way to face the world’s best on the international stage. Her consistency is better than her more “able-bodied” counterparts, having seen to it that our flag was raised more than once. Bubble wrapping is bad and our sectors of our economy need to get out of the bubble wrap and the government should get them to behave more like Ms. Yip.

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Maira Gall