14 Mar 2005

Is the 'Singapore' label disreputable?

I first came across this article at Sammyboy.com, but I believe it was originally posted on Yawning Bread.

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Although Singtel's failed bid for Hongkong Telecom was touted as a purely commercial move, the political angle may be the lasting lesson from it.
Earlier this year, Singtel, Singapore's main telephone company, made an offer to Cable & Wireless plc of the UK, to buy their 54% stake in Hongkong Telecom ("HKT"). The combined Singapore and Hongkong telecom company would have been the largest corporation in Asia outside Japan. But after three months of due diligence, and some complacency that the deal was for all practical purposes done, Singtel found itself up against a competing last-minute offer from Pacific Century CyberWorks ("PCCW") for the same stake. In the end, Cable & Wireless plc opted to sell to PCCW instead.

Much has been written about the episode, covering many aspects, though without inside information, it is difficult to know what the key factors were in swinging Cable and Wireless' decision. Commentators have compared the merits of the two offers; others have noted the extensive connections of Richard Li, the owner of PCCW, even when PCCW was merely a start-up with no real business off the ground. There has been speculation about China's influence – perhaps they didn't want a strategic sector to fall into foreign hands.

But I think the surprise, at least to Singtel and the Singapore government, was the vociferous opposition expressed by the Hongkong media and the public to letting HKT slip into Singaporean hands. When PCCW finally clinched the deal, there was jubilation at the victory of Hongkong interests over Singapore.

One might believe that it's just the expected rivalry between two commercial capitals, but I think it's more than that. To understand the depth of feeling, one must step out of the illusions that coddle Singapore. One must understand how ambivalent are Hongkongers' views about our "way of life". Many Hongkongers see Singapore as shackled and dispirited. This is the impression I get each time I ask ordinary people whom I meet in the SAR what they think of Singapore.


No ordinary foreign company

During the brouhaha, the key question was posed in the Hongkong press, but Singaporeans might have missed the implications of that question. Why were Hongkongers so exercised by a foreign company, Singtel, buying a controlling stake in HKT, when all this while, Cable & Wireless, a UK company, had been the controlling shareholder? The easy answer was that Hongkong had been a British colony, so a UK shareholder was not "foreign". The trouble with easy answers is that they often disguise the truth.

My reading is that the main concern was that Singtel was no ordinary foreign company. It is majority-owned by the Singapore government. Its Chief Executive is none other than Lee Hsien Yang, the son of Senior Minister Lee Kuan Yew. After absorbing HKT, the proposed combined company would still have the Singapore government owning more than 40% of the shares, enough to give it control.

Throughout the weeks, the Singapore government protested that this was a purely commercial bid by Singtel. Our local media duly echoed this line. Maybe it was, but the issue was that Hongkong didn't trust it to be so. In business, trust is half the deal.

The Hongkong establishment didn't want to risk letting the Singapore government into their lives. They came together to back PCCW.


What's wrong with the "Singapore" label?

Why has the Singapore government such a bad reputation? Surely the economic success of this city state is proof enough that they are good managers? On the whole – and you may still quibble about what exactly they could have done better – yes. But the Singapore government also has a dreadful reputation for being intolerant, hypersensitive, arrogant and petty-minded. And these have been demonstrated time and again on social and political fronts for the last 40 years. Newspapers and magazines have been shut down or circumscribed for being anti-government. Workers cannot form unions outside the ambit of the PAP-controlled National Trades Union Congress. Outspoken people have been detained for decades without trial. Books banned. Films banned [1]. Journalists deported. Opposition politicians sued for amounts way beyond conscience. Now all these are coming home to roost, for that's what I see as the lasting impact of this failed bid by Singtel: it has shown that we cannot separate economics from politics.

For a long time, we have fooled ourselves that we could. We compartmentalised our society and ensured that the "heartlander" enjoyed a steadily rising standard of living. At the same time, we have undercut his civil liberties, and pavloved him to look to the government as the fount of all good ideas. We have taught him to believe that free speech, radical social ideas, or parliamentary opposition were things we didn't really need. The economy would still do well without them. In fact, it would do better without these "distractions".

The local media – which the Minister of Information and the Arts has just reiterated must forever remain in local (read government-controlled) hands – helped to sell the message. Naysayers never got much space in them. In the "societal consensus" that the media conjured, we thought we had discovered a perfect model for running a society: keep the lid on politics so that economics may bloom.

In the new economy

In the new globalised economy, the preconditions of the Singapore model will no longer be available. We cannot keep Singapore as our own little cabbage patch, either politically or economically. Global businesses must be allowed in if we want to thrive. Thus, extensive reforms are in progress to open up many sectors – banking, insurance, telecommunications, for example. But it also means that local companies must go abroad too, to stay abreast of competition. Yet most big companies are government-controlled, and as this case has shown, the political reputation of the Singapore government is baggage they cannot shed.

The other precondition will also be unavailable in the new globalised economy – control of the media. How can we control the media in Hongkong, or Australia, or wherever we may want to venture, such that they will not say unflatterring things of our government's style? How to get people to separate economics from politics as Singaporeans have been taught to do?
Hence, one is led to this horrible thought: that all the years and effort spent building large Singapore companies, with the Singapore government as core shareholders, may be a waste. If these companies are held back by their government connections (with our government's reputation abroad), they may have a hard time serving as launching pads for the next stage of our economy – building the "external wing". Being unwelcome abroad is to lose goodwill among your customers even before you start doing business!

So, what to do?

It won't take a genius to say, either these companies must shed their government connections, or the government must shed its reputation. Both are easier said than done.

What will be needed to privatise these government-linked companies? Massive amounts of capital, far more than Singaporean investors have. To truly privatise them may mean, effectively, to sell them to world-wide bidders. Can our government stomach this?

What will be needed to shed Singapore's reputation? A major turn-around of our political style. An unprecedented loosening up of our political environment. And even then, it may take another generation to convince the world that things have really changed. People have long memories.

Tough choices, they are. But at least we have a wake-up call -- a glimpse of the real economic cost of the last 40 years of Singapore politics.

© Yawning Bread

7 comments:

ain't no drama... said...

about bloody time this is brought to light! all hail yawning bread! :) i second this perception of the current political state of Sg. real sad no one can do anything abt it though...

soci said...

some are trying, and that at least most be commended

akikonomu said...

Let's try a different tack.

Circa late 1970s, the then-PM of Singapore speaks admiringly of the South Korea chaebol/conglomerate system, and proceeds over the next few decades to implement/adapt the idea here.

Hence the GLCs, Temasek-linked companies, all the cosy and incestuous networking of huge companies.

Does Singapore's version of the chaebol system have the same flaws? Will it fall in the same manner?

soci said...

It all depends on how closely they followed, assuming they could understand the chaebol model. Is it easily transfered to another culture.?

akikonomu said...

Steve, they were probably only interested as far as "incestuous superstructure of companies and linked ownership" goes. Of course in Singapore, the ownership is all in the (many) hands/arms of the government and its proxies.

What is easily transferable though, is the institutional and structural weaknesses that such a system entails?

Anonymous said...

"To truly privatise them may mean, effectively, to sell them to world-wide bidders. Can our government stomach this?"

Selling Singapore's assets to foreigners. A truly stupid idea.

Agagooga said...

What about South Korean democracy? Hmm.