|
 The
gauntlet dropped in the chandeliered dining room
of the Mark Hopkins Inter-Continental, an elegantly
restored 74-year-old hotel atop San Francisco's
Nob Hill. As usual, Lee Kuan Yew minced none of
his words to a standing-room crowd, participants
at the Singapore Techventures 2000 conference.
But his forthright remarks on March 9 were really
meant for an audience half a world away - in his
home country and its neighbors.
"Asia
needs to embrace the New Economy," the Singapore
senior minister declared, referring to the exploding
world of Internet-enhanced enterprises. "Failure
to do so will mean an inability to compete."
To Singaporeans the nation's founding father warned:
"If we do not change fast enough, we're going
to miss so many chances, we'll kick ourselves
for it."
And
Lee's prescription for Singaporeans to join the
cyber-charged global e-race? "We need to
get our people to be more willing to undertake
risk. It requires a completely different mindset."
Like major mental overhaul, to hear the former
PM put it: "For us, the change means the
abandonment of rules which have served us well
for 30-plus years."
In
case people haven't felt the tremors, the ground
is shifting in Singapore. As it searches for novel
strategies for the New Economy, time-honored tenets
are being questioned, if not discarded. Among
them: risk-wary conservatism in business and finance,
the single-minded quest for efficiency and control,
and even the leading role of the state and government-linked
corporations (GLCs) to plot and spearhead economic
moves. Under this Singapore Inc. strategy, GLCs
have long amassed and deployed financial might,
and operated in a vast array of sectors, from
phones, ports and power to property and, at one
point, pastry shops.
Now,
Singapore leaders are thinking of accelerating
plans to pull the state out of business, through
faster deregulation of major industries like electricity,
and the speedier sale of public stakes in GLCs.
The apparent aim is to recast the economy into
one truly driven by private enterprise. "Societies
must be flexible in re-inventing and refining
their economic system," Lee told his listeners
in San Francisco. "The strength of the American
system is that it has always embraced change and
creative destruction."
While
applauding the new tack, advocates of a less dominant
state also wonder whether the loosening up will
extend beyond the economy. Lee notes that Singapore,
like several other Asian countries, is already
trying to promote creativity among children by
making primary schools less results-driven. The
government is considering tweaks in the local
media, now ruled by Singapore Press Holdings newspaper
group and the Television Corp. of Singapore, though
foreign ownership is still limited to 3% (see
story page 47).
Denying
any sudden sweeping change, Trade and Industry
Minister George Yeo Yong Boon says that Singapore
society has been shifting for some time. "You
will find year after year a continued transformation
of the social and cultural landscape," he
told Asiaweek. "It's more evolutionary, the
result of a new generation educated after Independence."
In
an interview with London's Financial Times, Prime
Minister Goh Chok Tong said the government would
consult with people more, and may designate an
area for the public, including political activists,
to freely speak their minds. A number of Singaporeans
in key sectors such as the arts, gay rights and
women's issues do speak of gradual change in the
air (see story page 48).
Those
who want to cling to the safe, old ways have Richard
Li Tzar-kai partly to blame for this subversion
of the status quo. Last month the Hong Kong Netrepreneur
jolted the Lion City with his headline-grabbing,
ego-zapping victory against well-established,
cash-laden Singapore Telecom, the giant telephone
GLC. There are other reasons for Singaporeans
to question their past formula for success. But
up there among the big whys has to be losing Cable
& Wireless HKT, SingTel's Hong Kong counterpart
and erstwhile merger partner, to a 33-year-old
upstart and his Pacific Century CyberWorks outfit,
backdoor-listed less than a year ago.
"We
lost because we were overconfident and arrogant,"
says a senior Singapore banker. "What hurt
us more is that the winner wasn't a large American
telco like AT&T or even a big Hong Kong tycoon
like Li Ka-shing, but his young son using a relatively
new Internet company." Adds an American consultant:
"To take its companies to the next level
Singapore needs to swallow a bit of its pride.
Can it?"
Looks
like it can, on many levels. The Lion City seems
keen to make the HKT setback not just a humbling
experience, but also a learning one. And the quickest
study may well be the entity with the most pride
to guard: the government. "It should give
more space to the private sector," Goh told
the Financial Times newspaper. "We must allow
ourselves to be challenged by other people and
be prepared to listen."
And
not just listen. Authorities plan to allow more
competition sooner in the telecommunications and
power generation sectors dominated by SingTel
and Singapore Power, another GLC (see story below).
Already, the electricity company has delayed its
listing, while a new private venture licensed
to enter the telephone market is thinking twice
about laying land lines, amid the prospect of
more rivals coming in sooner.
For
its part, the state-run investment company Temasek
Holdings may speed up the sale of holdings in
leading GLCs, which include 15 of the 20 largest
listed enterprises. Goh acknowledged that the
state's 77% stake in SingTel may have caused a
problem for its HKT bid. Many people in Hong Kong
and possibly China were concerned that the Singapore
government would get involved in the running of
the Hong Kong telco - a misimpression the government
must remove, said the PM.
Others,
however, see weightier reasons for Temasek divestment.
Inderjit Singh is a legislator of the ruling People's
Action Party (PAP) who heads his own microchip
services company, Utac. He says state ownership
slows down GLCs - a major disadvantage during
fast, aggressive takeover battles. "There
are probably several levels of approval before
a decision can be made," Singh explains.
"In SingTel's case, the majority shareholder
Temasek would have had to convene [its own] board
to get approvals, because these are government
funds." The MPhimself says he sold an e-commerce
start-up to Norwegian investors for $7.7 million
within 48 hours of starting negotiations.
Indeed,
state authorities tend to be very conservative,
keen to avoid the appearance of profiteering or
excessive risk-taking - hardly the sort of attitude
that makes for go-getter moves. At the same time,
there is a tendency for state companies to copy
the winning strategy of one of their number. "There
was this group think among GLCs," says a
real-estate analyst. "The head of one sees
his friend who heads another GLC making money
in property, so every GLC goes into property."
SG
Securities strategist Manu Bhaskaran takes the
argument further: "The government has no
business being in business. It is wasting time,
money and other resources trying something that
entrepreneurs can do far better. I'd like to see
more true privatization, not just a cosmetic selling
down of equity stakes in some high-profile companies."
MP Singh argues for state holdings of no more
than 30%-40% in any company. That, he adds, may
require letting foreigners own sizable percentages.
"We should allow any foreign entity to come
in and take over whatever stake they can,"
says Singh, "and then play a relevant role
in the company."
But
are the authorities really ready to take a back
seat and let the private sector take the economy's
steering wheel? Many officials probably have little
confidence in private firms, especially small
ones. "The government says Singapore must
develop world-class companies," says nominated
MP and law lecturer Simon Tay. "But the assumption
of the government is that these world-class companies
will be GLCs."
The
problem is partly historical, Tay explains. For
decades, state companies were the main economic
players, providing many essential goods and services
which businesses just could not deliver. Small
enterprises, moreover, have long been excluded
from major economic and business policy-making.
Others
believe GLCs and the rest of Singapore Inc. are
part of the government's patriarchal control.
"The government takes the best talent into
the civil service or the armed forces," says
a banker. "It takes away a huge chunk of
our savings - equivalent to nearly 40% of the
salary for most Singaporeans - through the CPF."
The mandatory Central Provident Fund, adds the
banker, pays a mere 4% a year on average. By comparison,
local stocks earned 12% per annum over the past
decade. Of late, officials have been saying that
Singaporeans aren't saving enough. "They
take away 40%," asks the banker, "and
we're not saving enough for retirement?"
Defenders
of the CPF and GLCs point out that these cash
cows help fund Singapore's impressive infrastructure
and mass housing. But such largess may lead to
financial inefficiency. "The savings rate
is so high, but the returns are bad, not even
better than a bank deposit," says Tay. Many
analysts contend that GLCs are capitalized far
too much. "They can't seem to use all the
cash they have, to get the sort of returns entrepreneurial
Hong Kong companies deliver year after year,"
says the American consultant. One estimate puts
the money GLCs are sitting on at $10 billion,
partly a result of decades of highly protected
revenues. Compounding the problem is a natural
tendency for conservative officials to prize cash
in the bank more than leaping profits.
When
GLCs go abroad to invest and make deals, the pile
of money is an edge. But it isn't enough to win,
as SingTel found out in Hong Kong. Just as important
is having an image and a pitch that would fire
up investors and partners. "We've got cash
in the bank," says Tay. "We are known
to be very honest people - efficient, but maybe
not entrepreneurial. Singapore can effectively
deliver, but it's not known for grabbing new ideas
and running with them." By contrast, Li captured
the imagination of investors who pumped up his
stock value so high, he outbid SingTel even without
as much cash.
There
is no denying, however, that the tenets Singapore
now finds problematic underpinned its success
for decades. Forward planning, financial might,
firm control, full commitment from everyone, and
fear of failure - these five F's helped the nation
weather economic crises and political strife,
while creating an advanced, prosperous and well-ordered
city. Which is why it is doubly hard to let go
of them, even if they can be liabilities in the
fast-shifting New Economy. Nor is it easy to embrace
aggressive individualism, bold risk-taking, quirky
imagination, wheeling and dealing, which could
just as well be a formula for ruin if the market
goes bad.
The
reluctance to adopt new ways extends to other
aspects of society. Despite more liberal mores,
Minister Yeo believes Singaporeans still do not
want Playboy on the newsstands in Singapore. Nor
will people set aside their reserved manner and
speak frankly. "The culture is Asian,"
says the reservist general. "We are not comfortable
with children talking back to adults in a rude
way. We better keep it that way. It's the essence
of being civilized. Because I respect you and
I know what the sensitivities are, I adjust."
A
further challenge to those wanting to revitalize
Singapore business - the effort may demand some
relaxation of political curbs, to create a feeling
of entrepreneurial confidence and freedom. But
the ruling party does not seem keen to loosen
up on politics much. "The PAP is willing
to liberalize without democratizing," says
Tay. "They are willing to open up to consultation
and to make themselves and the civil service more
entrepreneurial. But they don't want two political
parties." Well, if the PAP won't allow the
rise of a powerful rival party, can it tolerate
differences of opinion with new business powers,
especially if giant GLCs are privatized? Certainly,
if speaking one's mind freely could still land
a person in jail or subject him to other pressures,
then that would discourage free thinking and tinkering.
Ultimately,
however, it is Singaporeans themselves who must
change, not just the GLCs or the government. They
must be willing to cast aside past certainties
and easy conventions and take on unfamiliar challenges.
It won't be easy. Ask entrepreneur Paul Lim. Years
ago he failed in business and became an outcast
of sorts. But the 35-year-old has bounced back
with an online shopping venture called GeoAsia.
Still, he doesn't expect everyone to follow suit.
"Some understand the new way," he shrugs.
"Others are still stuck in the old economy."
PM Goh speaks of tensions between "cosmopolitans"
open to the world and "heartlanders"
clinging to tradition. Yet it shouldn't be an
either-or: like the 1999 Lear production of Singapore
director Ong Keng Sen, which combined traditional
Asian forms in an avant-garde staging, a synthesis
of old and new is probably what will work best.
Mark
Konyn of Dresdner RCM Global Investors in Hong
Kong sees no rush for unbridled enterprise in
the Lion City anytime soon. Kim Teo, a CMG fund
manager in Singapore, thinks it is still attractive
to investors even now. But Christopher Wood, a
strategist at ABN Amro Asia in Hong Kong, says
Singapore needs telecom deregulation, a free press
and hordes of free-wheeling investment bankers
for all those Net deals. He adds: "Trying
to change the mindset of people and force them
to take more risks ... often takes a generation."
Clearly, Lee Kuan Yew has his work cut out.
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