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:
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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