AN EARLY success story in Contact Singapore’s 11-year history is Genesis-Alliance.

The boutique property and lifestyle company is now building 31 ‘ultra high-end’ villas in Sentosa and has opened the region’s first Armani/Casa home furnishing store in Raffles Hotel.

Malaysian businessman Derek Wong, whose net worth is estimated to be $150 million, set up Genesis-Alliance after he met with officials of the Singapore Tourism Board, Economic Development Board and other agencies.

The company currently employs 20 people, including 12 Singaporeans, at its Wisma Atria office.

Source : Straits Times - 29 Apr 2008

Straight-talker Dr Tony Tan has never been afraid to air contrarian views on the country’s economy

CRYSTAL ball-gazing is a risky business. Miss the mark and it’s egg on your face. Hit the bullseye and acclaim follows.

Of course, whether there is a reaction at all can depend on who you are and whether people even remember what you’d said.

With Dr Tony Tan Keng Yam, people remember. They will recall the former Deputy Prime Minister’s ominous words earlier this week, when he said the world could be facing the worst recession in 30 years.

Media agencies flashed the pronouncement coming from a man who is now No 2 at the Government of Singapore Investment Corporation (GIC), a major sovereign wealth fund. When the news reached economists’ ears, they said the prognosis was too bearish.

Three days later, the newsmaker put in qualifiers.

“Let me state clearly that this is not GIC’s forecast for the global economy. It is a scenario which GIC is considering,” Dr Tan, 68, who has been GIC’s deputy chairman and executive director since retiring from politics in 2006, said in a statement Today received on Friday.

To be precise, it was the gloomiest of three scenarios on the investment firm’s radar. One, optimistically, sees the end of the credit crisis and no recession anywhere. The second scenario is a mild US recession and no world recession, while the third is a deep, prolonged global recession.

“In light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC,” he said, on why he highlighted the scenario during GIC’s Staff Conference on Monday.

Dr Tan and his oft-surprising economic talk go a long way back. In his 27 years in politics, he would regularly offer his take on the economy’s pulse, even when his portfolio did not include trade or finance.

He also came to be known as having an independent mind, confident enough to air opinions contrary to those of his Cabinet colleagues. One of those watersheds was in 1985.

Singapore was buckling under a global slowdown and a domestic burden: The Government’s high-wage policy aimed at moving the labour-intensive industries towards high-tech activities had made the island an unattractive place to do business.

A rescue team was despatched in April 1985. Mr Lee Hsien Loong, then the Minister of State for Trade and Industry, led a committee to dish out remedies including tax breaks. Still, the recession raged on.

In December, Dr Tan — the Minister for Trade and Industry — proposed the unthinkable: Slash employers’ Central Provident Fund (CPF) contribution rate, then set it at 25 per cent.

This was resisted initially by many, including Mr Lee.

But cool-headed calculation prevailed and the employer’s CPF rate tumbled to 10 per cent in February 1986. The pro-business move was credited with saving the economy and prompting a rethink of CPF as a macroeconomic tool.

“That was brave and correct,” says Mr Charles Chong, who served as a rookie Member of Parliament at Sembawang constituency under Dr Tan from 1988 to 1991.

“He was never hesitant to express views that deviated from the mainstream.”

Such as in 1999.

Dr Tan publicly called Government scholarships “silly”, because employers are forced to hold positions for a scholar, who might turn out to be unsuitable for the job or unwilling to join them after his studies.

Why not give out tuition loans instead, he suggested.

No, came the reply from then-Prime Minister Goh Chok Tong and Mr Lee, the other Deputy PM at the time.

A deviating prognosis

Behind Dr Tan’s refreshing views, say those who know him, is his private-sector background.

Before standing for elections in 1979, this nephew of the late Tan Chin Tuan — OCBC’s long-time chairman — was the local bank’s general manager for 10 years. The stint must have sharpened Dr Tan’s keen interest in financial matters and attuned him to the concerns of commercial businesses.

In fact, on wide-ranging matters, Dr Tan could “quickly distil the main issues”, said Mr Chong.

One of his passions was scrutinising the economic forecasts of the Ministry of Trade and Industry (MTI). There were times when he stated, on record, his own prognoses — and they would differ from those of the ministry.

In August 1997, for example, he said that while the MTI had predicted full-year growth to be 5 to 7 per cent, the turmoil in Asia’s currency markets might result in “slower growth” for the whole region.

Three days after he spoke, the MTI upgraded its forecast range to 6 to 7 per cent because of a rebound in the manufacturing industry.

On how Singapore’s economy should evolve, Dr Tan had myriad ideas, some of which involved using words that flew over the head of the layman.

“Sawtooth economy”, “growth discontinuity” and “creative destruction” have all been bandied about by the politician, who was once a university lecturer and has a Master’s in Operations Research and a doctorate in Applied Mathematics.

‘Look after the downside …’

Today, he chairs the National Research Foundation and Singapore Press Holdings.

“He is a very good but serious speaker. Tony Tan never entertains you. He tells you what the problem is,” former Prime Minister Goh said in 2001 during the General Election.

Mr Lee Kuan Yew, the country’s first Premier, was so impressed that his top-choice successor was actually Dr Tan, who turned down the offer.

In 1995, Dr Tan was called out of retirement. After two other heavyweights, Mr S Dhanabalan and Mr Yeo Ning Hong, resigned in 1994, Mr Goh requested that he return to strengthen the Cabinet.

Dr Tan agreed and rejoined as Deputy Prime Minister and Defence Minister, saying he would participate in decision-making on trade, industry, banking and other areas of the Singapore economy — even though they were not his primary portfolio.

As GIC’s No 2, Dr Tan continues to watch the economy. His stated philosophy is: “If you look after the downside, the upside will look after itself.”

It’s redolent of his cautious demeanour — one that, political commentator Seah Chiang Nee argues, is “necessary in today’s Singapore, when everyone’s talking about renewal. You need an old hand to come and sort of introduce a jolt of reality sometimes”.

Source : Today - 26 Apr 2008

I REFER to the report, ‘Issues of cost, procedures bubble up in new en bloc rules’ (BT, April 12), which mentioned that the Ministry of Law is planning to review the recently amended legislation governing en bloc sales.

I urge the government to take a more holistic approach in reviewing the whole issue of en bloc sales.

Rules are only as good as the institutions that enforce them. An important ‘institution’ involved in en bloc sales is the Strata Titles Board (STB).

The independence, competence, resources and procedures of the STB should be reviewed because it has a critical responsibility in reviewing and approving transactions involving up to billions of dollars.

It is important that the STB is made up of individuals who are both highly independent and competent. It is also important that the STB follow international best practices for arbitration and have proper procedures for dealing with possible conflicts of interests involving its members.

The STB must also be well-resourced and individuals who serve on it should be properly motivated to discharge their duties with due care and diligence. A robust STB, coupled with clear legislation, can do much to assure all parties that en bloc sales are a ‘fair game’.

However, I would like to urge the government to go further than that. I hope that we do not approach en bloc rules purely from the perspective of urban renewal or economic development. En bloc sales should also not be driven primarily by the commercial interests of property developers, consultants, agents and advisers, but rather by the interests of those who are personally affected by en bloc sales, be they majority or minority owners, and the wider interests of society.

As we move towards a more caring society and recognise people with more diverse talents than just academic and business success, we should also take into account the wider societal and environmental impact of en bloc sales.

Can we have the moral authority to play a leadership role on the world stage, which is increasingly concerned with wider societal and environmental issues, if we disregard them in our own backyard?

What are the wider societal and environmental costs of tearing down perfectly good buildings and dislocating communities compared to the economic benefits?

We have gone a long way in terms of economic development, thanks in large part to good public governance. It is time that we look after not just our body but our soul as well.

Mak Yuen Teen

Source : Business Times - 15 Apr 2008

CapitaLand’s Liew Mun Leong talks to VIKRAM KHANNA about his journey to the corporate world and the new dynamics of S’pore’s property market

‘I SPENT 22 years in the civil service, but people never believed I was a civil servant,’ says CapitaLand’s CEO, Liew Mun Leong, winner of the outstanding CEO award at the 2006 Singapore Business Awards.

‘I remember when I was leaving for the private sector, I was walking to the lift with Ngiam Tong Dow who was the first permanent secretary I worked for. I said to him, thank you for your help all these years in the civil service. And Mr Ngiam looked at me and said, ‘but you have never really been a civil servant’.’

Certainly, Mr Liew does not fit the stereotype. If you were to meet him without knowing his background, you would more likely think he’d been in business than in government. And you would not be totally wrong; even while in government, he displayed an entrepreneurial streak.

His style as a CEO is also un-civil servant like. For instance, he’s not a believer in hierarchy or protocol - something he learned from working with one of Singapore’s founding fathers, Dr Goh Keng Swee. ‘If I go to a city in China and I want to see a site, I won’t necessarily go through the CEO. I’ll just go straight to the site and have the person down there show it to me.’

To engage in a conversation with Mr Liew is to be ‘edutained’. A natural and vivid communicator, he is a repository of stories, anecdotes, jokes and above all, lessons. He conveys the impression of someone who learns something from everything he does and observes, who is constantly in learning mode - and who remembers it all - names, places, dates, incidents going back decades, even prices on restaurant menus.

Emails to staff

Read his recently released book, ‘Building People: Sunday Emails from a CEO’ and you get the idea. These were emails he wrote to his staff on Sunday afternoons, in his characteristically direct and casual style. They are about anything he might have learned from someone he has met, a book he has read, an experience he has had.

He is a great believer in the power of communication. ‘CEOs and leaders could do well to make known their thought, ideas, concerns and encounters,’ he writes in his preface, ’so that the people they lead can be closer to them mentally and emotionally.’

Sixty-two year old Mr Liew’s long professional journey which has taken him to the top of South-east Asia’s largest property development company, began as a civil engineer in the Ministry of Defence, building military camps, barracks and airbases. He later joined the public works department, where he helped construct, first Paya Lebar airport, and then Changi airport during the 1970s.

‘Changi was the largest project in Singapore, it was huge,’ he recalls. But I remember, when we were building it, all we were focused on was making sure it would be ready for the official opening on July 1, 1981. We never thought we were building the best airport in the world. It never even crossed our minds.’

Later, Mr Liew was to go back to build Changi’s terminal two in the mid-1980s.

After that, he had his first opportunity as a CEO. ‘I was approached by the government. They said SISIR (the Singapore Institute of Standards and Industrial Research) is in trouble, can you help?

‘SISIR was started in the 1970s to test Singapore-made goods and to help SMEs meet technological standards. I was originally meant to spend two years there, but I ended up spending five-and-a-half years.’

‘If you ask me where the turning point was in my thinking as a leader, it was at SISIR,’ he says. ‘Because in PWD and Mindef I played technical and functional roles, but now for the first time, I had to take total responsibility and answer to a board.’

When Mr Liew took over at SISIR, it was troubled. ‘The first thing I did was interview all the scientists and engineers there, one by one, to find out what’s bothering them.

‘What I found was that they were doing their own work. They were motivated, but they didn’t know where the organisation was going. Nobody had pulled them together and said to them ‘this is our mission, this is where we are going.’

‘One thing I told them was that I don’t want SISIR to do academic research. I want to do industrial research that I can commercialise. We are serving industry, we are not doing something esoteric.

‘I realised that as a leader and CEO, I needed to formulate a vision for them. A direction had to be defined. Because otherwise, we only had a fragmented bunch of laboratories in which people were doing their own thing. I also realised I had to communicate a lot with them. So I started holding town hall meetings for all the staff every quarter. I also learned the importance of doing Q&A with staff.’

And then, Mr Liew saw an entrepreneurial opportunity for SISIR. ‘It struck me that SISIR had a pot of gold in the form of expertise - scientists and engineers. But their work was not commercialised. And because of that, SISIR had to keep going back to the government for grants. And that meant we were controlled by the Ministry of Finance, even when it came to recruitment of people.

‘So I thought, we should be self-financed. Once we were not subsidised, the government would not interfere.

‘So, I went to the Minister staff meeting, chaired by Lee Hsien Loong, who was then the Minister for Trade and Industry. I said, Minister, I’ve got good news for you, I don’t need a government grant anymore. I will be self financed, but I need to be liberalised in terms of my practices and processes.

‘He looked at me and said, are you sure you can survive? I said, sure, I will do marketing. But if the government wants me to set standards, I will treat the government as my client and I will charge for it. I will also do contract R&D and testing and I will buy my own equipment for that. He said ok, you give me a programme and I’ll give you three years to be self financed. And in the end, we succeeded.’

Having proven himself as a CEO at SISIR, Mr Liew was persuaded to take up his first job in the private sector. In 1992, he became CEO of the construction company L&M.

The immediate priority there was to clean up a financial mess; the company had overexpanded and its share price was languishing. Mr Liew found himself having to retrench staff and tighten financial controls. In 1995, L&M was bought over by an Indonesian consortium led by Johannes Kotjo, former CEO of the Salim Group, with Bambang Suharto - the elder son of Indonesia’s then president - also being one of the shareholders. They persuaded Mr Liew to stay on as CEO.

‘They said they would give L&M this pan-Jakarta highway project. It was sure to make a lot of money. So I stayed on for a while.’

‘I remember every Friday I had to go to Jakarta for meetings. But I found that the meetings were about distribution of money. Someone from public works would say he needs to get various approvals, so he needs $2 million. Someone else would say he will do a survey for us, it’ll cost US$3 million. Some general would say he needs $3 million for another task. I thought, by the time I finish distributing all this money, what will be left for the company? It was a scam.’

Mr Liew chose to resign, although by then L&M had been turned around and its share price had more than doubled.

There was another challenging job waiting for him, at Pidemco Land, the government-linked property company, which he joined in 1996.

‘At that time, the government had already started the ’second wing’ policy,’ he recalls, referring to the government’s strategy of encouraging local companies to venture overseas. ‘But Pidemco was not able to handle its overseas projects. They had projects in Suzhou, Shanghai, Vietnam, Malaysia and Auckland but didn’t have the expertise to develop or run these projects. So I brought in the whole chain of expertise, many of my PWD kakis.’

Gradually, Pidemco was stabilised. But the biggest turning point for the company came in November 2000, when it acquired DBS Bank’s stake in DBS Land, the bank having already announced its intention to exit the property business. Mr Liew had four days to make the decision, as other suitors were also interested.

‘There was no way we could do thorough due diligence. All we had to go on was publicly available information. We had had no dialogue with DBS Bank.’

Ho Ching, who was then CEO of the Singapore Technologies Group, Pidemco’s parent, set up a meeting between Mr Liew and Jackson Tai, who was then DBS Bank’s chief financial officer.

‘I remember I met Jackson Tai at the Empire Cafe at 6.30. We exchanged prices for five rounds before we settled at S$2.92 a share for DBS Land. Then we shook hands.’

The effective merger of DBS Land and Pidemco led to the creation of CapitaLand, Singapore’s largest listed property company.

‘The acquisition of DBS Land gave us scale,’ says Mr Liew. At last, CapitaLand could become a significant international player. And over the next seven years, that is what it became. It now has a footprint that spans more than 100 cities in over 20 countries. It is Asia’s largest owner/operator of retail malls and the global leader in service residences, as well as a leading REIT and property fund manager.

‘Over the seven years, we have generated $19 billion in total shareholder return and have accumulated profits of $4.9 billion,’ says Mr Liew.

Tough calls

But along the way, he had to make some tough calls. One of them was the sale of the Raffles Hotel in September 2005 for $1.7 billion to the private equity firm, Colony Capital.

‘I remember, at the press conference to announce the deal, the first question I was asked was, ‘Mr Liew, how would you like to be known as the man who sold The Raffles?’

‘I said, I don’t think it’s wrong. First, we would need $2 billion to be in the world’s top 10 in terms of the number of rooms, which we can’t justify to our shareholders. Second, even if we do that, the return on equity would be low, around 4 per cent. Third, it is not a business we thought we could run in parallel with Ascott. I have two hospitality arms. I think Ascott is better in the sense that it’s in the top league in the world. So, why not take the $2 billion and invest in Ascott instead? And then of course, I got a gain of $600 million for our shareholders.

‘The people who objected to the sale were talking on the basis of sentiment and emotion. But I said, shareholders have put money in me. I can’t give them returns in the form of emotional payback. I have to give them returns in cash.

‘And anyway, at the end of the day, ok we sold the Raffles, but the Raffles is still in Beach Road!’

Apart from triggering a jump in CapitaLand’s share price, the Raffles deal marked a turning point in the perception of the company, says Mr Liew. ‘Investors no longer saw us as just a GLC; they saw us as a very commercial player.’

This perception was reinforced when CapitaLand became the first Singapore property company to launch a real estate investment trust (REIT), the CapitaMall Trust, in July 2002. The process had taken six years.

Mr Liew explains: ‘When I took over Pidemco Land in 1996, we were very heavily laden with bank borrowings. The problem was, how do we relieve this burden. Then came the Asian crisis in 1997. The excesses in the real estate had made banks reluctant to lend. So we had no choice but to tap the capital markets.’

‘But the REITS we created were not done as a monetisation exercise. We created them as a second income stream, a second purse, unlike some people who treat Reits as an opportunity to sell their assets.’

Private equity is another area into which CapitaLand has ventured. It has 15 private equity funds, but with a difference: ‘In all our property funds, we have a sponsor’s stake of up to 30 per cent, our own skin is inside’ Mr Liew points out. ‘And we show investors our projects. So we’re not an ordinary fund manager, we are also the investor and the developer. Because of that, we were able to create 15 funds so quickly, in China, Japan, India and Vietnam.’

As an engineer, Mr. Liew is convinced that his work helps to build not just physical structures, but people. ‘One reason Singapore has been very successful is because of how we have provided infrastructure and housing,’ he says. ‘Because we have built an environment that is effective. And when you build such an environment, the people are also built. So, if you can build for people, you can build people. That’s the mission of the company. We want to build for people so that people can be built.’

Source : Business Times - 5 Apr 2008

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

What would be the impact of increasingly higher energy prices and a weakening US dollar — and hence a sharply stronger Singapore dollar — on businesses here? What can be done to combat the negative impact, and exploit the opportunities, of these twin developments?

Predeep Menon Executive Director & CEO Singapore Indian Chamber of Commerce & Industry (SICCI)

DEPENDING on the economic sector in question, these two trends can either provide some relief or turn out to be a double whammy. For instance, the trading sector is generally taking a hit, as US dollar deals are now generating less revenue when the deals are booked locally in Sing dollars. Unfortunately, even for companies in the aviation or logistics sectors, the escalation in energy prices outweighs the forex benefits and any relief is minimal and transient.

On the flip side, a stronger Sing dollar could mitigate inflationary pressures on our domestic economy and should result in cheaper US dollar-denominated imports. It could also induce greater investment in overseas markets and encourage more Singaporeans to travel abroad - a further boost for our travel industry.

However, there is great concern over the spiralling cost of energy and other key commodities. The weakening US dollar also indicates a loss of confidence in the US economy. This, many analysts fear, could lead to the undesirable situation of stagflation. Hence, our companies need to hedge their risks better as well as boost productivity, thereby enhancing their cost-competitiveness in a volatile global marketplace.

Capitalise on opportunities

Mike Sim Executive Chairman/CEO Sinwa Ltd

FOLKS in the shipping industry like to say that if not for their industry, half the world will starve while the other half will freeze. Rising oil prices or the weakening greenback will not change the fact that people everywhere will still have basic needs like food and energy. Additionally, oil prices will stay high irrespective of the weakening US dollar because global demand for oil - driven largely by China and other rapidly industrialising countries - far outstrips supply.

Due to the imbalance, oil and gas exploration activities are intensifying all around the world. Therefore, companies that can successfully find ways to tap into this boom can actually thrive amid a sliding greenback and escalating oil prices.

Sinwa began to diversify into the offshore oil and gas sector in late 2006, and we have since established two joint ventures with separate partners, one to build and charter a jack-up rig and another to convert and charter a seismic vessel. These two developments have allowed us to diversify from our mainstay of ship supply and logistics, as well as provided lucrative new revenue streams.

Sinwa continues to realise more business opportunities in the offshore sector. In Western Australia we are focused on the oil and gas sector because exploration activities in that part of the world have increased rapidly in recent times. We are rapidly developing our warehousing and logistics infrastructural capabilities to meet increasing demands for such facilities in the near future.

Business opportunities abound regardless of what the external environment is. The trick lies in identifying new business opportunities thrown up by the external landscape and capitalising on them.

Charles Reed CEO interTouch

THE US recession will affect some parts of Asia and result in higher inflation and slowing growth. Singapore, however, not only has a pro-business environment that attracts high foreign investment, it also has a robust regulatory infrastructure to boost and sustain growth. The recent Budget also indicates that incentives are in place to help businesses in Singapore tide over global downturns.

Rather than focus on the negative impact of the slowdown, companies should focus on the opportunities. For example, new revenue sources can be explored by keeping a close watch on fast-changing consumer and industry trends. Organisations can also make strategic decisions to diversify their businesses and expand their scale and scope in order to create a natural hedge against economic volatility.

Ultimately, businesses need to be committed to a long-term vision in order to sustain their growth and success. At the same time, business flexibility is critical - tactics and policies should be constantly reassessed and tweaked to ensure that any challenge resulting from an economic downturn can be translated into a business opportunity.

Aye See Tan Managing Director, Asia Pacific Savvis Singapore Company Pte Ltd

BUSINESSES in Singapore are already seeing an increase in their power costs. This will have a negative impact on companies deciding whether to base their businesses in Singapore. To overcome these challenges, companies should consider how they can better manage their power consumption through technology and economies of scale. In our case, we see an opportunity for managed service providers, like us, who can offer value together with economies of scale as an outsourcing option for companies here.

The economic crisis in the US has narrowed the gap between the US and Singapore dollar significantly. We think that cash-rich businesses or those that can tap into low interest rate borrowings here will be well-positioned to take advantage of this opportunity to expand their investments into the US or consider strategic acquisitions that will add value to their existing business.

Pinaki Rath Managing Director Gold Matrix Resources Pte Ltd

BUSINESSES have generally reconciled to the strength of the Singapore dollar and have hopefully hedged themselves appropriately. It is not just that the Singapore dollar is strengthening - it is more about the endemic weakness in the US dollar. Witness that most Asian currencies are strengthening against the US dollar as well. So we are in a level playing field, except possibly with respect to China where the yuan is keenly priced and closely shepherded.

It is fair to say that higher energy prices hurt our economy because they act like a tax increase. In real terms, oil prices have returned to levels last seen in the 1970s. However, oil’s impact is not as powerful when set against their diminished economic importance due to higher energy efficiency nowadays. Singapore businesses are now better able to take the punch.

During current inflationary pressures, businesses can further improve by observing financial restraint and making the most of the strong currency by investing it wisely. We can then be proud to have an economy worthy of a more expensive Singapore dollar.

Be nimble

Liu Chunlin CEO K&C Protective Technologies Pte Ltd

HIGHER energy prices spell inflation and uncertainty. A weaker US dollar, and a correspondingly stronger Singapore dollar, will make our goods and services less competitive. Marginal businesses squeezed between the higher business cost and lower demand may get into trouble, and possibly trigger off a chain of defaults. The cloud of uncertainty will add to the woes. Companies which have entered into medium and longer-term contracts without fluctuation clauses will worry a lot. Add to this the spectre of pandemic flu - witness the current flu episode in Hong Kong and some other Asian countries.

Looking back, things picked up for the Singapore economy around the time the integrated resorts were announced after years of recession and consolidation. There might have been a false sense of optimism, that we were on an inevitable roll. Perhaps we had taken our eyes off the basics of productivity and innovation and complacency had set in. This will put our longer term success at risk.

We need to manage the economic uncertainties of higher oil and commodity prices by remaining nimble, that is, willing to change strategy and tactics when they do not work or new factors emerge. Besides that, we need to get back to the fundamentals of greater productivity and gaining global market share through R&D and innovation. While some countries and companies are swept over by the wave of uncertainty and change, we need to ride this wave.

Geraldine McBride President and CEO SAP Asia Pacific Japan

IN A world subject to increasing energy prices and more volatile currency fluctuation, the need to enhance productivity of people and processes to deliver customer value has never been greater.

The ‘constant adjustment paradigm’ that organisations must not just adapt to, but learn to thrive within, is a force which will increasingly pervade commercial decision-making in most business scenarios, moving forward.

It is not just the impact of oil prices and the US dollar which are challenging businesses today. What is happening is that all the previously stable relationships between input factors, across all businesses, are becoming progressively more volatile.

As the world’s leading business software company we see a continued need for businesses to grow by responding quickly to such changes. We see the kind of business environment we are currently experiencing as providing additional opportunities for us and for those clients who work together with us to grow their capabilities.

Look East …

Sam Yap S G Group Executive Chairman Cherie Hearts Group Int’l Pte Ltd

RISING energy prices will no doubt have a severe negative impact on businesses as they almost certainly translate into higher operating costs.

A stronger Singapore dollar may also prove to be disadvantageous for many Singapore companies, as our exports become less attractive to US-based customers, who make up a significant portion of our customer base. The good side, though, is that Singapore companies will be able to get US imports more cheaply than before.

On balance, the twin developments, while likely to have a negative impact on Singapore companies in general, are unlikely to cause catastrophic damage since Singapore has been ‘looking East’ by diversifying into Asian economies. Furthermore, with our strong fundamentals of skilled labour, transparent operations and good infrastructure, Singapore will be able to capitalise on its competitive strengths to explore markets such as the Middle East, which have huge potential, as well as attract investments from these places.

Teng Yeow Heng Michael Managing Director TR Formac Pte Ltd

IT is increasingly clear that our export market is going to be very difficult in the coming months and we need to depend more on our domestic and Asian markets. On the domestic front, thanks to the building of the two integrated resorts and the hosting of major events such as the Formula One grand prix as well as the Youth Olympics, Singapore’s growth can be sustained in the construction and service sectors to tide over the hard times. On the Asian front, fortunately, China and India are still growing strong. This will help mitigate some of the negative fallout form the US slowdown.

In the short term, the strong Singapore dollar may not be a totally bad thing as it will help bring down imported inflation and allow us to invest overseas more cheaply. However, a strong Singapore dollar is worrying for us in the long term if our businesses cannot compete successfully in the higher value-added market segment.

In the short term, most of our major competitors will feel the impact of higher energy costs and therefore, it may be less worrying for us in terms of losing competitiveness. In the long term, access to cheaper alternative fuels can be the crucial determining factor in how well we can compete.

Annie Yap CEO The GMP Group

BUSINESSES can expect consumption, production and operating costs to escalate with sky-rocketing energy prices coupled with the flagging greenback. With the US being one of the world’s largest economies, no doubt many countries will be affected by the imminent US recession.

However, I agree with Minister Mentor Lee Kuan Yew that Singapore is at the heart of the world’s biggest growth region - Asia. Singapore has grown significantly less dependent on the US economy over the years and has diversified to include Asian markets. This is one way Singapore businesses can exploit the situation - by foraging in emerging Asian markets like China and India, which are cited to be the fastest growing economies in the world.

And with ongoing mega projects in the pipeline like the integrated resorts, the Formula One grand prix and the most recent unveiling of the government’s $20 billion plan to extend MRT lines, Singapore can and will weather the storm. Such projects will definitely combat the negative impact of the ailing US economy while providing plenty of opportunities for the local market, especially for the building and construction and hospitality and services sectors.

…and beyond

Derek Goh Executive Chairman/Group CEO Serial System Ltd

THE twin negatives of rising energy prices and a falling US dollar will trigger a monster of a stagflation in the US economy. This will have a great impact on the global market as the US will cut imports and suffer high unemployment.

Singapore will be badly hit by this double whammy of high cost of production and a fall in exports. As an export-oriented economy, Singapore businesses will suffer a great setback if we do not seek alternative energy substitutes and boost domestic consumption quickly.

With a strong dollar, we could invest in better yielding projects abroad to generate healthy income for our funds. Singapore businesses should explore and exploit more aggressively emerging markets like Vietnam, Russia and Brazil.

We should build a strong shelter now for stormy days ahead.

Wee Piew CEO HG Metal Manufacturing Ltd

WHILE the weakening US dollar has helped mitigate the full impact of record-breaking oil prices and imported inflation, exporters - especially to the US - will be hurt by the strength of the Singapore dollar. The Monetary Authority of Singapore is in an unenviable position of preventing the Singapore dollar from rising too much which hurts our cost competitiveness but at the same time having to manage the impact of rising imported inflation.

These are significant global trends which small countries like Singapore, let alone Singapore companies, have to learn to cope with. Businesses that are dependent on the US market will have to start looking for new markets. With rising oil and commodity prices, there are other markets which are thriving - the Middle East, Russia and Brazil.

Be prepared

Lim Soon Hock Managing Director Plan-B ICAG Pte Ltd

BUSINESSES should brace themselves for tough times ahead. The lethal combination of ever higher energy prices and a weakening US dollar, which is the last thing the world wants to see, will wreak havoc on the global economy, and is dreaded equally by governments, businesses and the man in the street.

In such a situation, businesses should curtail if not abort expansion and investments, as well as seek to monetise assets, for example, clearing inventory even if it means selling below cost. Cash is king.

On the other hand, companies with a significant cash horde may want to consider acquiring businesses in the US or elsewhere. Given the strong Singapore dollar, this is a rare opportunity to buy into companies or acquire intellectual property at a relatively low cost, to expand into key overseas markets or to strengthen the company’s product portfolio.

Businesses should also start to plan for rightsizing. Retrenchments, if any, should be a last resort. Instead, companies should look into a shorter working week and adjust salaries towards a higher variable component tied to the company’s performance. It is also a good time for companies to invest in more training and development to equip employees with better skills and know-how for the recovery.

I see the onset of an economic tsunami. Businesses will do well to prepare themselves and err on the side of caution for a secure future when the economy recovers, which I believe will take at least a year or two to happen.

Goh Chong Theng General Manager, Singapore Rabobank International

SEVERAL reasons have contributed to the rising price of oil. These include the global supply-demand imbalance, political instability in several oil-producing regions, increased capital inflows into commodity markets and short-term demand spikes due to seasonal weather phenomena. The weakening greenback exacerbates the trend because oil prices are denominated in US dollars.

The Singapore dollar has strengthened against the greenback in recent months; however, its rate of appreciation is still far lower than that of oil prices. Although it is only a matter of time before the greenback recovers, many of the aforementioned reasons behind rising oil prices remain long-term challenges. Therefore, the inflationary impact of higher energy costs is likely to affect businesses - and ultimately consumers - beyond the short term.

A scary scenario could unfold amid prolonged inflation here - businesses may face insatiable demand for higher wages (due to increased living costs) on top of rising material and energy costs. This could eventually lead to productivity losses, profit reductions and perhaps a slowdown in the local economy.

Companies ought to plan for such a worst-case scenario so that they are better prepared should it become a reality. For example, Rabobank consciously keeps labour costs and various overheads under control. Yet we do so without undermining our core competencies in the agricultural, energy, commodities, telecommunications and marine/logistics sectors.

Going forward, the government must ensure that our national policies are designed to keep business and living costs (comprising property prices or rentals, taxes, transportation charges and more) under control. If Singapore wants to remain successful in the unending quest for capital and talent inflows, then we must remain an attractive place to work and live in.

Watch costs

Benjamin Low Managing Director, South-east Asia and India Secure Computing

SINGAPORE’S export economy will inevitably be affected by the twin developments of US$110 oil and a weakening US dollar. For companies like ourselves that trade in the US dollar only, this development is indeed very beneficial. A weak US dollar and stronger Asian currency will help our customers as our products and services become more affordable for them. We hope this will translate into increasing revenue as our customers will be able to purchase more of our products.

On the flip side, our cost structure and salaries are all denominated in Singapore dollars. This has effectively driven up the cost of business substantially even without any further increase in fixed business operation costs such as rental.

Hence, we are under greater pressure to watch our spending and continue to increase our top line and margins to counter rising costs. We will have to drive our sales revenue up substantially to counter the increasing business operation cost.

The biggest threat today, in my opinion, is a crisis of confidence. If financial markets continue to deteriorate, the housing sector and the stock market will continue to slide. This will effectively deter customers from spending which will affect not just corporates, but consumers as well. The threat of hyper inflation is also on the horizon if the cost of goods continues to spiral out of control.

Glenn Tan CEO Motor Image Enterprises

HIGHER energy prices, a weakening US dollar and a stronger Singapore dollar will raise the cost of living and make the business environment even more challenging. With the buoyant economy and low unemployment of the past few years, Singaporeans have become complacent. With tough times ahead, we must change our mindset and prepare for some hard work, otherwise we will lose our competitive advantage.

Companies will have to streamline their operations to maximise efficiency and productivity while minimising costs. More importantly, employees must play their part. They must be more reasonable in their expectations and be willing to ride the wave with their employers instead of job-hopping and driving up employment costs.

Salaries have gone up but productivity has dropped. If this continues, Singapore will lose out to its neighbours. While consumers tighten their belts in search of better value, they too must be realistic and accept that costs have increased.

However, it is not all doom and gloom. I believe that tough times are fertile ground for creativity and innovation. We should take this opportunity to re-invent ourselves to keep ahead of the competition. This will require a concerted effort from all Singaporeans.

Leon Perera Group Managing Director Spire Research & Consulting Pte Ltd

THE weakening US dollar will pose three negatives - weakened competitiveness of Singapore exports to the US market, weaker US foreign direct investment landing in Singapore and risks to those firms who price in US dollars (which includes a broad swathe of internationally-oriented professional services firms operating in Singapore).

To manage these dangers Singapore needs to continue diversification of export and FDI markets, in particular taking advantage of the rise of emerging markets like China, India, Russia and the Gulf states as export markets or sources of FDI. Firms pricing in US dollars should introduce regular (for example, quarterly) schedules for fee revisions based on exchange rate movements. Conversely, Singapore firms should seize this opportunity to purchase strategic assets in the US before a dollar rebound.

The impact of rising energy prices on Singapore’s general competitiveness will be more limited, as energy is usually a small component of total business cost. The main impact will be in terms of higher general rates of inflation. Companies should pay close heed to their cost curves during this time, reducing unnecessary expenses and re-engineering business processes for greater efficiency.

David Hope VP & Regional Managing Director Lawson Software, Asia & Japan

THESE challenges are not unique to Singapore, of course. The key is that Singapore needs to work across all fronts to ensure that it remains a competitive and compelling country to invest and do business in.

Examples of areas where businesses face real challenges include the daily cost of living and working in Singapore where office and residential rentals have both increased substantially over the last 18 months.

And if Singapore aims to be an attractive and long-term competitive place for foreign talent and investment, then it is important for it to offer a range of housing options, such as government housing for rent including the Singapore Land Authority’s black and whites and pre-war bungalows, the supply of which appears to be rapidly decreasing due to changes from residential to commercial usage.

During a time of rising costs, local businesses need to focus on improving efficiency and productivity to secure competitiveness. They can take advantage of a stronger Singapore dollar, which makes US-dollar priced tier one global technology tools - such as licensing for enterprise resource planning, supply chain and business intelligence - more accessible.

Others

Thomas Ting Managing Director TJ Systems (S) Pte Ltd

PERSONALLY, from a consumer’s point of view, a stronger Singapore dollar is definitely a good thing. Even for some businesses, for example, the travel industry, profits arising from the US exchange rate will be higher.

However, higher energy prices will affect the operating costs of local businesses, with even higher bills for transportation.

If the cost of energy or fuel continues to escalate, I’m sure the food industry will have to increase their prices and as a result, entertainment costs for businesses will go up as well.

Perhaps, the government can help companies with some relief on taxes or encourage companies to use energy-saving products. There’s definitely a need to promote awareness on saving energy.

It may be a good time for businesses in the energy-saving sector to increase their market share at this time.

Dora Hoan Group CEO Best World International Ltd

A MODEST and gradual appreciation of the Singapore dollar is supportive of economic growth. Local enterprises can benefit from a stronger local currency to dampen inflationary pressure by reducing the cost of imports. A weak dollar means a fall in prices of US products in foreign markets which will therefore benefit US exporters and foreign consumers. I believe, though, that it should be managed at a level that is neither too high nor too low to help sustain long-term economic growth and stability both here and abroad.

When a currency becomes too strong or too weak, it tends to distort international competition. In the 1990s, for instance, a strong dollar distorted US competitiveness against foreign markets. During the same period, China and several Asian countries had been happy to see their currencies depreciate in line with the US dollar since it allowed their exports to stay buoyant.

Sound monetary management must strike a balance among all factors affecting markets, which is quite tough to do in today’s market-driven era. I suppose it is a good strategy to allow the Sing dollar to appreciate at a rate which doesn’t disadvantage Singapore exporters, but at the same time keeps inflation at bay.

Michael Reading Managing Director Island Power Company

RECENT developments in the US have sent a strong signal to all businesses that the global landscape can change rapidly and that Asian markets are closely tied to events around the world.

The US Federal Reserve has recently sought to stabilise financial markets as the US banking crisis continues to unfold. The lesson to learn in periods of instability is that time is of the essence, and both businesses and the government must respond quickly to be effective.

With the global rise in commodity prices, the associated increase in utility costs poses a major challenge for businesses. The Singapore government must implement policies that help to improve Singapore’s competitiveness swiftly. Introducing new players in the energy market is one strategy of driving competition and keeping utility costs down, ultimately benefiting the end consumer and keeping the Singapore economy competitive.

Wong Teek Son Executive Chairman and CEO Riverstone Holdings Ltd

THE US dollar is a common currency used across the world for business transactions. It is impossible to ignore the impact of the weakening dollar on the global economic outlook.

Singapore is a major exporter of hard disk drives and semiconductors to the US and the developments will slow the electronics manufacturing sectors as costs are driven up.

Riverstone, a leading manufacturer of high-tech cleanroom gloves, relies on a natural hedge to weather the storm as the company uses raw materials bought in US dollars. To mitigate currency risks, we will engage business deals in different currencies based on location of operations.

Further, companies need to brace themselves for a challenging year and concentrate on their key propositions to sail through the storm.

Source : Business Times - 24 Mar 2008

A FEW years back, Liew Mun Leong, chief executive of CapitaLand, came to Singapore Press Holdings and gave a talk to journalists. His talk left a deep impression on me.

The topic was how he saw the property market going through a strategic inflection point. Mr Liew drew the idea of strategic inflection point from the book Only the Paranoid Survive by Andy Grove, the chief executive of Intel.

Mr Grove defines a strategic inflection point as a time in the life of a business when its fundamentals are changing significantly, and these would be times when critical decisions can make or break a business. In the book, Mr Grove said only those who constantly try to anticipate change will survive when change happens.

Indeed Mr Liew has thoroughly absorbed the essence of the book and put it into practice with great effect. He successfully steered CapitaLand in directions which subsequently positioned it to enjoy the developments which had played out in the last few years.

Today, CapitaLand is a completely different animal. Not only is it the largest real estate company listed on the Singapore Exchange, with a market capitalisation of $16 billion, it is also the largest in South-east Asia. It is now the leading foreign real estate developer in China, with about $6 billion worth of its balance sheet represented by assets in China.

There, it has stakes in over 70 malls as well as serviced apartments which will hit 10,000 by 2010, and has a pipeline of more than 35,000 residential homes. It is the largest retail mall owner/manager in Asia, the largest serviced residence owner-operator globally, and the leading real estate fund and investment trust manager.

More than 50 per cent of its assets are now outside Singapore. It has footprints in more than 100 cities in over 20 countries. And its assets range from residential to commercial and integrated leisure, entertainment and convention centres. Another new business to be built is industrial and logistics real estate.

I don’t envy analysts who have to cover CapitaLand. I can’t imagine how they go about ascertaining the revenue from its numerous sources in over 100 cities. However, I was offered the opportunity to have a chat with Mr Liew last week and that helped in gaining a somewhat deeper understanding of the group.

CapitaLand, says Mr Liew, is positioning itself to capture the one big long-term inevitable trend, which is the economic development of Asia. As the trend plays itself out, there will be increased economic activities, rising income, urbanisation of cities, increased consumer spending and rising demand for leisure and entertainment.

Each of CapitaLand’s products is tapping into two or more of these ’sub-trends’. For example, the residential business will thrive as economic activities pick up, income increases and more people migrate to the cities. Retail is poised to benefit from all the five ’sub-trends’.

And for each of the product offerings, the group is capturing profits at almost every stage. The biggest value is created at the development stage when the group buys a piece of land to build one of its products, be it a condominium, commercial building or other real estate. Here, it will have to bear risk that the market may turn bad, make sure that the products to be built will be what the buyers want, source for funding for these projects, etc. Once the product is built, CapitaLand can either sell it or offer it to one of its Reits. CapitaLand has stakes in the Reits which earn stable income from the rental. Meanwhile, it also earns management fees for running its five Reits as well as 15 private equity funds. CapitaLand is where it is today because it was able to see ahead of the curve.

Inflection points

The first inflection point for the real estate market in the last 10 years was soon after the Asian financial crisis, said Mr Liew. The crisis was caused by excesses in Asia, companies borrowing ever more to fund projects based on very bullish assumptions. ‘Banks were lending money to property companies, earning debt returns but assuming equity risks because there was no recourse. The recourse was only the property.’

During the crisis, central banks limited commercial banks’ exposure to the real estate. ‘That was one inflection point. Our thesis is that we must learn to tap the capital markets. So we started commercial and residential mortgage-backed securities (CMBS and RMBS).

‘We also decided that going forward, real estate companies cannot be run like a traditional family-run type of business. Asian real estate has to be institutionalised, that is institutional investors have to come in. One way was through Reits. We think that if in the US, Reits can be a solution to the savings-and-loan crisis (of 1989 to 1992), then it should be something we could use.’

The process of pitching the idea of Reits to the government took six years, said Mr Liew.

Now we are entering a second inflection point. Bank lending has seized up. Meanwhile, the window to tap the capital markets through asset securitisation is not as open as before. In the current crisis, the well-capitalised real estate companies will emerge even stronger. While those with weaker balance sheets will have difficulties getting funding - ‘the juice to do business dries up’ in the words of Mr Liew.

Meanwhile, those who can have access to funds will get them at cheaper rates than before as the US Federal Reserve continues to lower interest rates.

Achievements

Mr Liew has achieved a lot since he took over Pidemco Land which then bought over DBS Land in 2000. Along the way, he had to make some very difficult decisions and take harsh criticisms.

In the second half of 1990s, he resisted the pressure of initiating new investments in countries like the Philippines, Indonesia, Thailand, China, Hong Kong and Vietnam at sky-high prices. But when he bought Furama Hotel in Hong Kong in 1998, he was severely criticised.

‘One of the key decisions which made us what we are today was to buy DBS Land. That gave us scale,’ said Mr Liew. Then he sailed into the perfect storm of the dotcom bust, the 9/11 terror attacks, Sars, Iraq war and the two Bali bombings which lasted nearly four years.

In 2001, he decided to revive the Shanghai Raffles City project, which had been abandoned a few years before. He was questioned why he wanted to throw good money after bad. Today, Raffles City in Shanghai is worth at least twice its investment cost of $350US million. It is now a recognised brand and three more are being constructed in Beijing, Chengdu and Hangzhou.

In the years immediately after the merger, the group’s share price languished at just $1-plus, about half the price Pidemco Land paid to buy DBS Land. ‘I was almost in tears when I spoke to my management in one of our retreats,’ said Mr Liew. ‘I said we were ex-civil servants, professionals, very good people. Surely we can run the company well so people can recognise the value in our shares.’

Then recognising the need to have an alternative source of funding, the need to get institutional investors in, the need to create a steady stream of income for the group, CapitaLand introduced Reits to Singapore. ‘It took us six years to pitch it to the government. We had to convince them of tax transparency, then we had to get the green light from MAS, MND and Ministry of Finance.’

As with most successful businessmen, luck had some role to play at some point. Mr Liew said that perhaps it was a blessing in disguise that CapitaLand did not get the integrated resort projects. ‘If it was in our books, it’d occupy a few billion dollars debts. Under the current landscape of credit crunch, i