Do you agree that business confidence in Singapore is at its lowest point in several years? Why? What can be done to boost confidence here?

S’pore / Region remains sound

WE ARE currently witnessing a crisis of confidence brought about by several forces, including high energy and commodity prices, the sub-prime mortgage crisis, reduced liquidity, the weakening US dollar, and more. Due to this ‘perfect storm’, business confidence has dropped to its lowest level in years.

Although confidence is low, fundamentally Singapore remains very sound. The current economic climate doesn’t change the fact that Singapore is a First World country with Third World growth rates. In other words, we are not faced with a long-term economic outlook that warrants the current doom-and-gloom pessimism. However, we shouldn’t ignore the current downbeat sentiments in case they become self-fulfilling prophecies – which could happen if businesses scale back on expenditures, investments and plans due to the negative sentiments..

Remember the phrase ‘irrational exuberance’ coined by Alan Greenspan? Perhaps what we are observing now is the exact opposite. Call it what you will, but perhaps what Singapore needs are a few public displays of confidence in the strength and resilience of the Singapore economy.

For example, Temasek Holdings and the GIC made headlines not too long ago with their high-profile, high-stakes investments in financial institutions like UBS, Citigroup and Merrill Lynch. If I may say so, perhaps another high-profile acquisition will go a long way towards boosting public confidence as well as growing their asset portfolios. And good deals are probably available if they can be sniffed out!

In addition, the government should continue with the current masterplan to position Singapore as an ideal country for multinational corporations and high-net-worth individuals to sink their roots in. If we can do this, then it sends a strong signal that Singapore has what it takes to succeed over the long term regardless of what the short-term conditions are. But this requires a multi-pronged approach encompassing policies related to economics, immigration, taxation, urban planning, and other areas.

- Goh Chong Theng General Manager Rabobank International, Singapore Branch

THE sub-prime debacle and the veiled threat of a similar financial exposure in the credit card space is no good news! Add to that rising oil prices, the Middle East situation, and the consequential impact of these eventualities is taking its toll on the business sentiment in Asia. That said, let’s be very pragmatic – Asia has come a long way since the 1995 and 2001 crises.

On top of a manifold increase in critical mass and financial discipline, we have a unique situation where most Asian nations are firing their economic cylinders and building a unique status of being producers and consumers. The recent election results in Korea and Taiwan spell more hope than ever before. Then of course there is China and India – two economies driving consumption and capital formation with committed investments in infrastructure to the tune of $1.2 trillion and $700 billion over the next 5-7 years!

Some knee-jerk reactions in certain financial markets have been visible, but it has not been a rapid downward spiral and has come with partial recovery. While I will not be too vocal in saying that Asia has largely de-coupled itself from the West in the way of economic impact, we certainly do not catch a fever when they sneeze!

At Brocade, we see several opportunities amid these circumstances and are working closely with our customers and partners to provide more value to them, mostly financial. The benefit will be apparent through technology that consumes less electricity and generates less heat. We are also providing services where we provide a comprehensive implementation and support solution to customers and partners at a pre-determined price point, instead of leaving them with an open-ended, complex implementation process that becomes cost-prohibitive and brutal on their operating expenditure budgets, especially during times like this!

- Deb Dutta Brocade Vice-President, Asia Pacific & Japan

ONLY one per cent of muvee’s revenue is local. In fact, we feel the business climate in Singapore is overly buoyant. With low unemployment rates, and interest amongst young graduates in entrepreneurial activities, we have found recruitment a challenge, and that is stemming our growth. We have been hiring internationally (50 per cent of our 84 staff are from 18 different nations) and are starting an office in Silicon Valley later this year; we have been increasing sales activities in traditionally difficult-to-penetrate places like Korea and Japan, and have been introducing new products targeted at the US consumer marketplace.

With a slowdown globally, it only means we have to work harder to reach more users. Local sentiments really only affect businesses if you are operating in a mature market and have stopped innovating along the way. We constantly re-invent and create new markets for ourselves, so we believe we are able to operate on a different rhythm from the local climate, and indeed the global business climate.

- Terence Swee Founder / CEO muvee

WE CANNOT say for sure that business confidence is at its lowest point, but we do know that Singapore remains well poised for sustained long-term growth. IT investments reflect companies’ long-term goals and strategies, and our performance so far suggests that the long-term prospects for Singapore and other regional markets remain good despite the current turmoil.

For example, according to a recent survey by Gartner, Asia is expected to lead the rest of the world in IT expenditure this year. IT budgets for 2008 are projected to rise by 8.3 per cent in Asia, which is much higher than the 3.3 per cent rise in the global average.

To boost business confidence, the government must continue to transform Singapore into a services-based economy, and to make the country an ideal city to live and work in. These will serve to attract multinational corporations and high net-worth individuals to Singapore’s shores, which is a sign that its long-term value proposition remains compelling despite the short-term uncertainties.

- Noboru Oi Group CEO Fujitsu Asia

THIS lapse in confidence from businesses in Singapore could be largely due to the most significant dip in the global economy seen in the past decade. It is therefore not surprising that companies are employing cautionary tactics at this time.

Despite the economic downturn, there are vast opportunities in the Asia Pacific for businesses as the region is still experiencing positive growth in several industries and sectors. In the booming economies of China and India, for instance, challenges posed by the economy are being translated into business opportunities for investors.

In Singapore, both the public and private sectors continue to show signs of positive growth. With projects like the government’s most recent $20 billion announcement to extend the train lines in the works, Singapore will surely battle the impact of the US economic downturn and the cloud of uncertainty will be lifted.

- Charles Reed CEO interTouch

AS THE US economy weakens, we observe that businesses have become more cautious in their outlook compared to last year. Companies selling to the rest of the world will face more headwind; business and input costs have increased; funding, in the debt and equity markets, has become more expensive and scarce. The situation looks worse with the consolidation of the property market that set record volume and prices last year. But we believe there are reasons to remain positive in the long run. US policymakers have shown that they are committed to dealing with the debt crisis using both monetary policy and other unconventional measures. The Singapore economy, having been restructured to take advantage of globalisation, should do well again on the first sign of stability returning to the global economy.

- Deborah Ho CEO DBS Asset Management

THE decline in business confidence reflects greater pessimism about the current business situation than declining expectations for the future. That is, expectations for business activity, revenues, profits, spending and employment have not fallen. Instead the pessimism comes from fear that slower consumer spending in advanced economies like the US, Germany and Japan will affect emerging economies. Already, this has been exacerbated by the US economy’s stagflation.

Singapore, however, has a healthy Budget aimed at raising growth. We are ranked third globally for network readiness in the World Economic Forum’s latest Global Information Technology Report. The national business mood might thus be overblown because the global rankings underscore the central role technology plays as an engine of growth and competitiveness of Singapore.

- Lars Ronning President, Asia Pacific (excluding China and Japan) Tandberg

WE NEED to put things into perspective. If you accept the general scenario from the IMF that world growth will be moderate but continue in the 4 per cent range in 2008, Singapore’s expected growth rate of 5.7 per cent for the first quarter is still healthy. And while the recent survey does show that overall business confidence is down, Singapore’s sales and profit figures still present a healthy picture for the Republic. Certainly there will be a squeeze if the global markets keep going down, but the fact that the Asian economy is continuing to grow should bode well for Singapore which serves as a major hub in this region.

Take advantage of Singapore’s strengths! A significant portion of Singapore’s success has been around our role as a value-creation hub and gateway to tap into the regional markets. Singapore’s proximity to key growth markets, India, China and Asean gives the country a distinct advantage, as does its focus on grooming and attracting multi-cultural talent. In that context, an ailing global economic climate can actually be an opportunity for Singapore to further differentiate itself as a choice hub for multinationals. It is interesting to note that while overall confidence in Singapore is down, business confidence is buoyant amongst the larger multinational firms. At Lenovo, Singapore is the base of several of our worldwide functions including treasury. In addition, our worldwide heads of services, as well as global supply chain, are based here. Our CEO lives in Singapore – a testament of our confidence in Singapore’s value as a hub, as well as our confidence in the region. It’s part of our Worldsourcing strategy – rather than having any single HQ, we locate and obtain talent wherever it makes the most sense.

Attracting the number of successful multinationals here will have a positive spillover effect for all businesses in Singapore – through industry partnerships, support requirements, as well as more business being brought into the local market. When it comes to competing for multinational investment, Singapore already rolls out the red carpet. Now, Singapore needs to rally the talent that already resides in the country to look at the region, and indeed the globe, as one big business opportunity.

- David Miller President of Asia Pacific & Senior Vice-President Lenovo

THE increasingly cautious sentiment is probably driven by the global – and in particular the US – economic situation. Singapore has received many accolades for having one of the top business environments and has been ranked as the world’s easiest place to do business by the World Bank. Both short and long-term issues are addressed via well-planned, transparent and comprehensive economic policies. Risks are also controlled through a robust set of regulations and checks. While the recent spike in inflation has increased costs, Singapore remains a relatively cost-competitive place.

On the demand side, the series of near-term national projects, eg, SOEasy, integrated resorts, Formula 1, NG-NBN, Sports Hub, Youth Olympics, etc, will also continue to boost local businesses. Within Alcatel-Lucent, growth in our business in Singapore remains healthy and the opportunity pipeline from these projects alone is strong. It’s clear that Singapore will remain a major regional hub for us.

- Oliver Foo Managing Director Alcatel-Lucent, Singapore & Brunei

Government measures can help

THE dramatic shift in business sentiment, from ‘nothing can go wrong with growth’ to ‘nothing is going right’, in the last three months has been amazing. It speaks volumes about how fragile business sentiment can be and how important it is to nurture this.

Clearly, Singapore businesses recognise the oncoming challenge of a slowing global growth and surveys reflect that anxiety. Having said that, I believe this is certainly not the worst we have seen here – Sars and Asian Crisis ‘97 notwithstanding. Singapore is lucky to be intricately tied with the Asian economic trade and growth cycle – which will continue, albeit slightly slowly. This will ensure sustained growth over time for Singapore. The healthy pipeline and order book that we see with local companies are a reflection of this.

The government can help at this juncture when the economic sentiment is weakening. Increased domestic investments and attacting new inward foreign investments with lower tax rates and incentives can be very useful. Hong Kong has reduced taxes – both corporate and personal – and Singapore will need to review its own rates and align them.

The high costs of real estate have been a dampener for the last two years, and increased inflation and GST have created a high-cost environment which is making business increasingly uncompetitive. This needs to be tackled boldly as hope alone cannot be a survival strategy!

- Girija Pande Regional Director Tata Consultancy Services

IT IS said that when the United States sneezes, the rest of the world catches a cold. Although some of the slack in the US can be taken over by China and India, both these countries themselves depend to a large extent on the US economy to absorb their exports.

The US recession and the weak US dollar will curb the demand of Asian exports to the US. Businesses are feeling the effects of more cautious lending and so are more pessimistic about growth. A strong Singapore dollar makes exports less competitive, and the increase in rents and currency-adjusted wages contribute towards the weaker sentiment.

Wages have risen also because of full employment and businesses have turned cautious, not knowing whether the US will have a short-lived or prolonged recession.

Our government needs to look into these concerns in the next Budget to prevent Singapore from going into a more severe slowdown.

- Tan Ser Giam Chairman Eastern Navigation Pte Ltd

MAY I suggest the following:

Reduce personal income and corporate taxes – to attract MNC investments and foreigners to Singapore so as to increase ’spending income’ in Singapore.

GIC, Temasek and Temasek-linked companies should increase the proportion of their investments in Singapore compared to overseas (overseas investments benefit their profit & loss figures but not the majority of Singaporeans).

Build at least six integrated resorts instead of two to have a real impact – learn from Dubai and Macau. Do it bravely, and do not do it ‘half big, half small’.

Increase government spending with more government projects and encourage spending to support local small and medium-sized enterprises (SMEs); in return, the government will receive more taxes from SMEs and this will help to boost the local economy via SMEs.

- David Ong LE Managing Director ASophia Asia Systems Pte Ltd

No need to be pessimistic

I DON’T share the pessimistic view on business confidence. I think that with the current global economical and political situation, one has to be cautious, but definitely not pessimistic. That is because with the megatrends of urbanisation and demographic change that we’re facing today, there are in fact more business opportunities available.

In 2007, for the first time in history, more people in the world lived in urban areas than in rural areas. With increasing urbanisation, we face an increased demand for basic needs of societies – for energy, clean water and better standard of living. Better standard of living will also require better public infrastructure – housing, transportation, sewage systems, healthcare, efficient administration, etc.

The most obvious demographic change that we’re facing today is the greying population, which calls for more private and public healthcare measures. All these mean the need for more planning, building, investment and development – both by the government and private businesses.

And that in turn translates into more businesses for MNCs and SMEs.

I think what makes people nervous is the lack of transparency in the banking sector. The lack of funds is not exactly the issue that we’re dealing with here. Rather, I believe the issues are the lack of information and sense of uncertainty on how the financial sector will develop. Even more so when it concerns the global financial sector, which is beyond Singapore’s control. I think the banks have to act with a lot more openness and transparency, so as to give consumers and businesses more assurance about the economy.

- Hans-Dieter Bott CEO Siemens Pte Ltd

LET’S not forget that business confidence is not linked to any specific element and tends to lag behind the current market scenario; when the markets start to get worried, confidence can continue to be high, and when markets start to improve, consumer confidence can remain low. What we do need to be cautious about is not to exaggerate the situation.

Many media articles are reporting doom and gloom but this is a cycle that the market goes through, as history shows. The silver lining here is that we are living and working in one of the strongest-growing regions in the world, which provides us with tremendous opportunities.

Confidence is tricky in the sense that it could change in either direction; so unfortunately while it takes time to move into positive mode, we as business leaders need to keep our organisations focused on delivering results to our customers.

- Gary Harvey CEOIpac Wealth Management Asia

THE uncertainty surrounding financial markets, particularly in the US, is definitely taking its toll on the confidence of businesses everywhere. That said, nobody knows for sure how this turbulence will pan out in the real economy with each economist having his/her own opinion on the impact.

It is perhaps inevitable that businesses in Singapore suffer a hit in confidence levels, because we have just exited a period of stellar growth.

Business cycles will however always prevail, and a possible period of slower growth is an opportune time for companies to prepare themselves to be more competitive during the next expansion.

This may include improving internal operational processes, and upgrading current equipment and employee skills.

Such steps will create a positive, forward-looking mindset instead of a pessimistic atmosphere which may be self-fulfilling.

- Poul Lorentzen Vice-President Dematic SEA Pte Ltd

Uncertainty lies ahead

I AGREE that business confidence in Singapore has been shaken in the last few months. There are real concerns about rising costs and inflation is at a 26-year high. Escalating fuel prices are driving up the costs of grocery items, electricity, transportation, education, housing and healthcare. Singaporeans are expecting higher salaries to meet their rising expenses. All these will contribute towards increasing business costs and impacting profits, as revenues are not keeping pace with costs. As economic conditions in the US worsen, there is an expectation that the worse is yet to come for Singapore and Asia.

However, if we look at the fundamentals, while there will indeed be tough times ahead, Singapore still has good reason to be optimistic.Nevertheless, we must take this time to re-invent ourselves and take positive action if Singapore is to overcome these challenges. For example, one of the highest business costs is salaries. Employees must be more realistic in their expectations to take a longer-term perspective towards employment and not just seek immediate personal reward. Beyond salaries, they should factor other tangible and intangible benefits such as work-life balance or career and personal development into their decisions. Employers too can re-look at their employment package, and offer a dynamic and conducive working environment and attractive training and staff welfare programmes to retain staff.

If we are going to build a foundation for long-term stability and growth, employees and employers must work together to facilitate a mindset change, moving away from a fixation on short-term gains. We must put an end to the handout mentality. If Singaporeans redefine their expectations accordingly to suit the challenges ahead, we will emerge stronger to position ourselves for even greater growth if we make a concerted effort to ride the storm together.

- Glenn Tan CEO, Motor Image Enterprises (Subaru)

THAT business confidence is at the lowest ebb in several years is not unexpected. It is difficult and unrealistic to expect it not to be so, when you have not one but several large banking and financial institutions with global footprints all in dire financial straits. The constant slew of negative news about the financial turmoil and impending economic crisis is not helping the situation.

The aftermath of the current banking and financial crisis is all about bank liquidity and solvency. If this could be restored in the financial system, business confidence would return.

However, it is still uncertain whether there will be more bad news down the road, so it is not unexpected that businesses, even though they have strong orders and new business, will remain cautious and jittery for quite a while.

I would think that businesses will be more concerned with staying viable, if not going for survival, rather than aggressively growing their business, given the current credit squeeze and the prospect of a global recession.

- Lim Soon Hock Managing Director Plan-B Icag Pte Ltd

BUSINESS confidence is low due to many factors that cannot be controlled locally. As we wait for the price of oil and the US dollar to stabilise, many businesses are unsure what to expect.

There is also a perception that many of the government aid programmes (Workfare, CPF top-up, public relief, community assistance, etc) came a bit too late and offer too little to maintain confidence.

However, while external factors cannot be controlled, Singapore companies and workers could strengthen their bonding and do whatever is necessary to remain viable and competitive. Further boost can be expected from the upcoming integrated resorts, F1, Youth Olympics – and other initiatives, if businesses can hold on bravely through these times.

Furthermore, bureaucratic rigidities and over-regulations can be further relaxed to encourage entrepreneurship and risk-taking, which are required in a free enterprise system – and boost morale and confidence.

- R Theyvendran Chairman / Managing Director Stamford Media International Group

Source : Business Times – 31 Mar 2008