Thursday, July 1, 2010
Friday, May 21, 2010
NO COUNTRY manages its water as well as Singapore. Admittedly, it has high rainfall and it is a tiny country, but that is exactly the trouble. As an island-city-state, it has little land on which to collect enough water for its 4.8m people, and not much room to store it. To supplement its bounty from above, it takes the salt out of sea water and imports supplies from Malaysia. But relations with its big neighbour are often strained; the two treaties under which the water is provided, both about 50 years old, will expire in 2011 and 2061 respectively; and Lee Kuan Yew, the father of the nation, has never forgotten that the invading Japanese blew up the water pipeline when they seized Singapore in 1942.
The first measure taken to escape foreign dependency in the years after independence in 1965 was a general tidy-up. Industry and commerce were shifted into estates and messy pig and duck farms closed down. That made it easier to purify the rainwater that in Singapore is fastidiously collected wherever it can be—in streets and ponds, even on tall buildings and bridges—before being taken by drains to reservoirs, and thence to treatment plants where it is cleaned to drinking-water standards. The catchment area is being increased by the creation of a pair of reservoirs, the first of which, due to be finished next year, will mean the rainfall-catchment acreage will extend to two-thirds of the island’s total land area. Little is wasted in Singapore. Used water is treated and then either safely disposed of, reused for industrial purposes or air-conditioning, or mixed with reservoir water for drinking. Together, recycled waste and desalinated water are expected soon to meet 25-30% of demand, and local industries, many of them with a need for the cleanest supplies, are more than happy to use it. Most of the discarded sewage, once treated, is carried 5km out to sea. Demand is also being contained. Subjected to constant water-consciousness campaigns, Singaporeans are obliged to install low-use taps and loos, and expected to be equally thrifty with their showers and washing-machines. As a result, domestic water use per person has fallen from 165 litres a day in 2003 to 155 today. The pricing system also encourages virtue. Both the tariff and the water-conservation tax rise for domestic users after the first 40 cubic metres a month, and there is a fee for various sanitary appliances. Industry faces much higher charges.
How is all this achieved? The most important ingredient is a sense of seriousness about water at the highest levels of government and a society that is generally regarded as pretty free of corruption. Then comes an autonomous water authority, professionally run by excellent, highly paid professionals (the boss is said to receive $700,000 a year). They are not afraid to bring in private-sector partners, and do what they believe needs doing, not what politicians want done. So money is invested in everything from dams and drains to membranes and bioreactors. Singapore’s water industry—over 50 companies, both local and foreign—is now thriving. Nanyang Technological University has three water-related units, and Singaporean companies are winning contracts in such countries as Qatar and Algeria. Singaporeans still import 40% of their needs. Even so, they have a supply of water that is clean, predictably delivered and reasonably secure . Sixty years ago they had floods, pollution and rationing.
Wednesday, April 28, 2010
When Thomas McMahon and his Indian backers were deciding where to locate an Asian commodities exchange, they turned initially to Hong Kong – attracted by its proximity to China and the mainland’s booming, commodity-hungry economy. Three years later, the exchange, a subsidiary of India’s Financial Technologies group, is about to open – not in Hong Kong but nearly four hours’ flying time to the south in Singapore. “We looked at Hong Kong with a view to being able to serve the China market, but we decided that we couldn’t run a viable independent commodities exchange from there – the business environment just wasn’t right,” says Mr McMahon, a former director of Nymex Asia. “Inversely, Singapore was very welcoming. The authorities were completely happy with the concept of an independent foreign-owned exchange competing with the existing exchange and the view seemed to be there should be a totally competitive environment, which is just what we wanted.” The city-state’s enthusiasm for what will be called the Singapore Mercantile Exchange, and its willingness to countenance potential collateral damage to the locally listed incumbent, the Singapore Exchange, neatly illustrates the business-friendly approach that is helping the island to emerge as a strong competitor to Hong Kong in the battle to be Asia’s 21st-century international business capital. Others put it more graphically. “You walk into Changi airport and they practically give you a hedge fund start-up kit,” James de Castro, one of the founders of Hong Kong-based Asia Alternative Asset Management, told a recent conference on the island’s financial centre.
The prize is huge. Rapid economic growth around Asia is creating all sorts of opportunities, dragging in large numbers of bankers, traders, lawyers and other professionals. More big companies in Europe, North America and India are deciding they need a regional headquarters – and the demand for English and reliable communications means the choice is usually between Hong Kong and Singapore. Japan remains the world’s second-largest economy and Tokyo the second-biggest stock market. But it is not really in the game as it is almost entirely domestically focused. For example, as a consequence of regulatory and language barriers, the Tokyo Stock Exchange has attracted fewer than 10 overseas listings since 2004, compared with hundreds bagged by Hong Kong and Singapore. Nor is anyone writing off Hong Kong, an indispensable entrepot for China and the regional home for most global investment and commercial banks, private equity funds, large investment institutions and international legal and accountancy firms. The self-governing Chinese territory is a big player in the capital markets, hosting a succession of blockbuster initial public offerings of Chinese companies and preparing this summer to co-host (with Shanghai) the IPO of Agricultural Bank of China, which at up to $29bn (€22bn, £19bn) is expected to be the world’s biggest listing. Underlining its importance, Michael Geoghegan, HSBC chief executive, recently relocated from London to Hong Kong and JPMorgan moved the head of its international private banking unit there from New York to focus on regional opportunities. Anthony Bolton, star stock picker at UK-based Fidelity International, has scrapped his retirement and decamped to Hong Kong to launch a China equities fund. The latest ranking of global financial centres, published last month by the City of London Corporation, shows Hong Kong has narrowed the gap with London and New York to its smallest since the study was introduced five years ago, with fast-improving Singapore just behind in fourth place. The advance of both cities is clearly worrying western competitors. “We cannot afford to be complacent in the face of growing competition across the world, not just in the US but also increasingly Asia,” says Stuart Fraser, City of London policy chairman. “There is a danger that new regulation could accelerate this shift in the financial centre of gravity towards fast-developing markets.” At the same time, though, Hong Kong has developed serious problems. Official pollution readings last month soared to record levels – five times the usual high – forcing schools to ban outdoor activity. Air quality reached “dangerous” levels on one day in eight last year. “There are air quality issues in Hong Kong, which affect companies’ ability to attract staff, and international business groups have made representations on this issue to the relevant authorities,” says Deborah Biber, head of the Australian Chamber of Commerce in Hong Kong. Those willing to breathe the air must pay property prices that are up to three times higher than Singapore. A 1,600sqft (150m•) apartment typically costs upwards of $10,000 a month to rent. In leafy Singapore, a house and garden several times the size can be had for less than $4,000. Potentially most damaging, Hong Kong appears increasingly inward-looking, with its politics and business focus becoming ever more fixated on China just as the rest of the region becomes more globalised. While Singapore plots how to dominate Asian commodity trading or take a chunk of the Islamic finance market from Malaysia, Hong Kongers contemplate how to handle political interference from Beijing.
Singapore, sitting near the equator at the centre of Asia’s trade lanes, suddenly looks both more central and more cosmopolitan. As a result, Singapore is emerging as not only a leading Asian centre for the commodities industry, trading both physical goods and futures, but also as a regional headquarters location for non-financial businesses, especially in information technology, pharmaceuticals, electronics and manufacturing. Other big companies use it as a base for their operations in the sub-region of south-east Asia, itself an area with nearly 600m people and an economy bigger than India’s. In finance, many institutions run divisions from Singapore, including Standard Chartered, Deutsche Bank and Barclays. In a sign of the times, the UK’s Prudential announced on Friday that it was adding a secondary listing in Singapore to its proposed dual primary Hong Kong listing as part of a $21bn capital raising linked to its plan to acquire the Asian assets of America’s AIG. The decision to add Singapore, says Magnus Böcker, chief executive of the Singapore Exchange, reflects the city state’s greater strength in fund management – its $1,250bn assets under management are about twice Hong Kong’s. “There is an attractiveness for them in reaching out to the Singapore-based institutional market,” says Mr Böcker. Importantly, the island state is also better placed than Hong Kong to benefit from India’s rise, which is prompting businesses in the subcontinent to find ways of expanding abroad. Wipro and Tata Consultancy Services, the information technology and outsourcing businesses, both have their headquarters for Asia in Singapore, and as many as 2,500 other Indian companies also have bases there, according to the India Business Forum. “We could have had our HQ in India, Sydney, Hong Kong or Singapore,” says Girija Pande, head of Asia Pacific for TCS. “[We came here because] we have a reasonable business in Singapore, which is larger than in Hong Kong, [and because] Singapore has very strong air links and connections to India, far more than Hong Kong. A lot of technology companies with whom we work . . . are headquartered here as well, so this is a kind of tech hub.” Many Indian expatriates say they feel more at home in Singapore than elsewhere in Asia outside their own country, in part because Singapore has a prominent Indian community of its own – the finance and law ministers are both Singaporean Indians, for example. The republic is India’s second-largest foreign investor and attracted more Indian foreign direct investment than anywhere else in Asia in 2008-09. “Every large Indian company is seriously looking at Singapore” as a potential international Asian hub, says Mr Pande. “Indians are in a lot of places here – industry, government, technology, banks; Indians are very comfortable here. We call it sometimes the cleanest city in India.” The close relationship is not an accident. “There are a few [Indian] companies in Hong Kong, but since 1991 [when New Delhi began liberalising its economy] this has been one of the main countries that Singapore has concentrated on [winning investment from],” says K.N. Raghavan, first secretary at the Indian High Commission in Singapore. Underlying these strategic developments, Singapore is also undergoing a gentle social transformation designed to alter its international image from sanitised nanny state to cutting-edge icon by injecting a dash of the edginess for which Hong Kong is famous throughout Asia, in sharp contrast to Singapore. The most dramatic example is the construction of two casino resorts, together costing about $10bn. The second, built by Las Vegas Sands, will open its doors shortly, giving the state that once banned chewing gum two of Asia’s biggest gambling operations. The government has also found other ways to make the city a more relaxed place, for example by reducing artistic censorship – cuts to films and plays are now largely restricted to contentious religious issues – and introducing a “don’t ask, don’t tell” approach to homosexual relationships, which remain illegal but are increasingly tolerated. It has built facilities such as a world-class concert hall and taken initiatives such as the annual Formula One grand prix.
Some things have not changed, however. In contrast to Hong Kong’s robust and vibrant free press, Singapore’s media is partly state-owned and entirely state-supervised. The country has regular elections, but the government is always formed by the same People’s Action party. That will almost certainly remain true after a poll due by next year, although provision is being made for more defeated opposition candidates to sit in parliament under a “best losers” scheme. None of that cuts much ice with international business, which is more interested in political stability and the rule of law than in opportunities for opposition politics. Hong Kong is not a full democracy either. But the gradual social liberalisation that is occurring in Singapore does reinforce its business proposition by making it a more interesting, more open and more cosmopolitan place for people of many different backgrounds to live. Ronald Arculli, chairman of Hong Kong Exchanges and Clearing, says the city is confident it will maintain its edge as the region’s leading financial centre and has taken steps to broaden its focus away from just China. It is attracting increasing numbers of listings from global companies…..“We are more than just a gateway to China,” says Mr Arculli. “Trading volumes are far higher than before and we have launched new products also.” In Singapore, though, the authorities remain confident that the momentum in this battle is with them. “I think Hong Kong wants to be open, but it is becoming a more Chinese city in composition, in instincts and in governance,” says a senior Singapore official. “That’s not a bad future for Hong Kong, because southern China has a great future. “But we’re thinking about Asia and the world – there’s Shanghai, there’s Bangalore, there’s Hyderabad, there are key western cities that are not going to stay still. That’s the way we think of our world. Hong Kong is not in the middle of the radar screen at all.
Reference : The Financial Times, Apr. 26th, 2010.
Wednesday, January 20, 2010
The first of two huge leisure and convention resorts based around casinos opens its doors in Singapore today, rolling the dice on a $10bn bet by Las Vegas Sands and Malaysia’s Genting group on gambling in the city state. The resorts – officially forecast to add up to 1.7 percentage points to gross domestic product in a full year – have generated controversy because they introduce gaming for the first since time independence in 1965. By April, however, the island state that once banned chewing gum will be home to two of Asia’s biggest casinos, competing with Macao, the world’s leading gaming centre, for wealthy Asian gamblers. “This is an entirely new sector of the economy,” said Leong Wai Ho, an economist at Barclays Capital Research, who spent three years helping to plan the casino resorts while working for Singapore government. Mr Leong said that the impact of the resorts would be multiplied across the economy, creating up to 40,000 jobs and boosting consumption as well-heeled tourists and business travellers flock to the city.
The biggest of the resorts, the $5.5bn Marina Bay Sands in the city’s business district, will boast two theatres and a convention centre for 45,000 delegates as well as a casino. A 1.2 hectare park with three swimming pools will float 220m above the pavement, spanning three 55 storey hotel towers with 2,500 rooms. “I 101 per cent believe that this is transformational,” said Thomas Arasi, chief executive of Marina Bay Sands, a subsidiary of Las Vegas Sands. “This is a once in a lifetime phenomenon.” …..He says he is unperturbed at the coup by RWS, which will today book the first customers into its $4.7bn hotel, in spite of having received the government go-ahead licence six months later than Sands. Mr Arasi’s bigger development will not be receiving paying customers until April, mainly because of delays caused by the engineering challenges involved in building three 55-storey curving hotel towers and a 120,000 square metre convention centre entirely on land reclaimed from the sea…..The delay will be costly for Singapore, which commissioned the two resorts as part of a grand plan intended to transform the country’s image from nanny state to racy resort city. The government wants to buttress manufacturing with a tourism sector earning S$30bn (US$21.5bn) in revenues by 2015 – triple today’s figure…..Most analysts and economists say they expect the resorts to be successful, with 70 to 80 per cent of revenues coming from gaming this year, falling to 50 or 60 per cent as retail, entertainment and conference facilities are phased in over the next 12 months…..Singapore has imposed a charge of S$100 a day or S$2,000 a year for residents to visit the tables as a way of calming vocal opposition to the casino developments from conservative Singaporeans who fear a spread of gambling addiction and even crime.
Genting’s development, the $4.7bn Resorts World at Sentosa, located on an offshore leisure island, will have four hotels with 1,800 rooms, a Universal Studios theme park and the world’s largest oceanarium alongside the gaming tables. Genting, which will take its first hotel customers today expects to open its casino in time for the Chinese new year holiday in mid-February, with other attractions phased in later. Sands, delayed by construction and engineering challenges, will open its casino and hotels in April. Neither company would discuss revenue or profit targets, but people close to Sands say that it is hoping for net profits of between $800m and $1bn a year from next year, while the smaller Sentosa resort is thought to be expecting net earnings at about S$750m (US$539m). Both operators have shrugged off the impact of tough rules on junketing – gambling trips organised for wealthy gamblers by independent operators – introduced recently by the government to deter money laundering. “We’ve never expected that we would do a great deal of junket play here in Singapore,” said Mr Arasi.
Wednesday, April 15, 2009
Singapore, one of the world’s most open economies, fittingly expects to be one of its fastest sinking. After a ghastly first quarter the government forecasts full-year shrinkage of between 6 and 9 per cent. What to do? By “recentring” the policy band that pegs the Singapore dollar to an (undivulged) basket of currencies, the Monetary Authority of Singapore gains a pitifully modest devaluation – estimated by analysts at about 1-2.5 per cent. MAS was careful to attach some suitably tough language, in effect putting currency traders on notice that more aggressive action will not follow. In truth, there is not much more Singapore can do. Sharper depreciation may help exporters, but any gains would be modest so long as global demand is in hibernation. Meanwhile, a weak currency would encourage capital flight, the Asian leitmotif of global risk aversion. Net capital outflows for the region as a whole were $145bn in the second half of 2008, according to the World Bank, or more than net inflows in the whole of 2007.
The city state has few other tools at its disposal. It has already pushed the boat out on fiscal stimulus, where it is among Asia’s biggest spenders with a $13.7bn package worth about 8% of gross domestic product. The breakdown of first-quarter output illustrates the difficulty of stimulating demand in an island of under 5m people. Swooning external demand resulted in the manufacturing sector falling 29%, almost treble the contraction in the fourth quarter of 2008. Construction bucked the trend, up 26%, due in part to a strong pipeline of housing projects. But falling house prices, down 14% in the first quarter according to official data, mean this offers limited comfort. Scariest of all, of course, is Singapore’s role as a leading indicator for the Asian economy. Expect more downgrades to follow.
Tuesday, March 3, 2009
ITIF uses 16 indicators to assess the global innovation-based competitiveness of 36 countries and 4 regions. This report finds that while the U.S. still leads the EU in innovation-based competitiveness, it ranks sixth overall. Moreover, the U.S. ranks last in progress toward the new knowledge-based innovation economy over the last decade.
Reference : http://www.itif.org/index.php?id=226
Wednesday, January 21, 2009
In good times, governments have the luxury of fretting about an ageing population. In bad times, they start to worry about a vanishing one. Singapore, the beneficiary of a population that grew by almost a fifth during the economy’s recent fairytale years of high growth and low inflation, is undergoing a sharp reversal. Almost two-thirds of 796,000 new positions since 2003 were filled by foreigners, mostly in construction and financial services. Of them, 200,000 will leave by 2010, reckons Credit Suisse, causing the population to fall 3.3% to 4.68m. As harsh as that looks, the prediction implies that the economy merely gives up the jobs it created in 2008 and a portion of the new jobs in 2007. The reality could be far worse. Many expatriates took their leave during a shallow Sars-related recession in 2003, causing population growth briefly to dip below zero. This time, companies will cut deeper. Fourth-quarter gross domestic product contracted 12.5% – the worst on record. The electronics assembly sector, accounting for two-fifths of non-oil exports, has been hard hit.
Data from CEIC, an Asian research house, suggest that unlike in previous slumps, labour productivity had already been declining long before this recession – as early as 2007. Employers may therefore turn a deaf ear to entreaties from the national wages council to freeze or cut salaries. The withdrawal of highly paid financial services workers will hurt output, as well as all the satellite industries – domestic helpers, taxi drivers and restaurateurs – that depend on them. UBS, part-owned by the Singaporean government, may be the only big foreign bank not shrinking with impunity. Thursday’s budget should be a masterclass in pump-priming; the government has already changed a law allowing it to tap into managed reserves as a source of fiscal stimulus. But stopping the reverse diaspora looks beyond it.