Friday, 8 January 2016

Singapore Business Federation outlines new routes to growth

Helping local firms expand overseas among proposals it will present to Govt next week
By Marissa Lee, The Straits Times, 7 Jan 2016

Singapore's next leg of growth depends on local companies spreading their wings overseas, which would mark a shift from the strategy of simply pulling in more foreign investment, the Singapore Business Federation (SBF) said yesterday.

Its strategy was outlined in the business chamber's new economic position paper, which offered a raft of suggestions to support business growth.

"If you look at Singapore now, most of the resources are still concentrated on bringing in foreign investment. But we now need an equivalent set of institutions and policies to help our companies go overseas," said OCBC board member Teh Kok Peng, who chaired SBF's focus group on competing on a global platform.

A key thrust in the report was that Singapore needs to take a decisive shift towards building a strong base of local enterprises with a global reach, or risk losing its slice of the pie in a fast-changing world economy.

One suggestion was to appoint a new minister to help develop local enterprises, said the report, which was signed by 28 trade associations and chambers and around 70 top-level executives before going to the Government next Tuesday.

"There are not enough Singapore companies going overseas," said SBF chairman S.S. Teo, noting that in 2010, the Government set a target to produce 1,000 globally competitive companies with revenues exceeding $100 million by 2020.

"We took a count; I think there are only 300 so far. We don't think this target can be reached."

Dr Teh said the Government should also give local firms more opportunities to participate in major public projects and consider "government M&As (mergers and acquisitions)" that will reduce the number of state agencies to make them easier for firms to navigate.

The SBF also proposed investing part of workers' Central Provident Fund money in the local bourse. This would boost the limping share market to fund the expansion of listed companies.

The SBF identified a growing number of "middle class" companies with stable earnings that exceed the bar of the Catalist junior board, but are not quite big enough for an SGX mainboard listing. A new market platform could be developed for these firms, it said.

The SBF said it has never before put forth a paper of such breadth to the Government, touching on a range of issues from foreign worker levies to talent development.

Mr Teo noted that some of the ideas proposed could appear "radical" and require "substantial changes" to existing policies. "But we have to act decisively or risk greater failure in the years ahead," he said.

"The newly elected Government has a fresh and strong mandate. There is no better time than now to take bold and decisive moves that will strengthen Singapore's position."

Member of Parliament and banker Liang Eng Hwa commended the SBF's "deep dive into a wide range of business issues", adding: "In the new Cabinet, we have two full ministers at the Ministry of Trade and Industry, one specifically overseeing industry. I suppose the Prime Minister recognised the added attention needed."

Tweak policies to help firms, says SBF
By Marissa Lee, The Straits Times, 7 Jan 2016

While its focus is on identifying new ways for the economy to grow, the Singapore Business Federation (SBF) has urged the Government not to forget about the short-term woes of firms here.

The chamber said in its new economic strategy paper released yesterday that it wants an official review of the costs companies are facing, and a re-calibration of the foreign worker levies and policies to help ease the manpower crunch.

"(The Government has said) there is no U-turn and I think the companies accept it... but this is feedback from many of the businesses in our working groups," said SBF chairman S.S. Teo.

The paper calls on the Government to work with business chambers and trade associations to refine its tight foreign labour policies to "make sure that Singapore does not price itself out of the market".

SBF chief executive Ho Meng Kit said: "I think there can be tweaks at the margin, at the sectoral level and at the enterprise level."

One suggestion was for the Government to extend the Lean Enterprise Development scheme to firms that are larger than small and medium-sized enterprises and to give foreign worker levy rebates to reward companies that have reduced their foreign worker dependency.

Mr Teo said: "In the last few years we got feedback that certain signals may have been wrongly received and that we do not welcome foreigners." He added that we have to "make sure that they really bring value to Singapore".

SBF will present its position paper to Mr Heng Swee Keat, Finance Minister and chairman of the Committee on the Future Economy at a conference next Tuesday.

'Use CPF money to help liven up local stock market'
By Wong Wei Han, The Straits Times, 7 Jan 2016

Business leaders want the Government to use Central Provident Fund (CPF) money to revitalise the stagnant stock market and provide more capital for local companies.

The Singapore Business Federation (SBF) said the CPF money should be managed separately from the GIC fund pool to allow domestic investments. "There is scope to consider having pension funds investing in the local stock market. Currently, our CPF money is pooled with our reserves and managed by GIC," the SBF said in its position paper released yesterday to the Future Economy Committee.

The paper proposed a list of recommendations to shape a pro-business economic future, including making the "moribund" stock market more vibrant again.

"Unlike other jurisdictions where their pension funds have provided strong support for their stock market, Singapore rides against the wave by specifically stating as a policy that the funds managed by GIC are to be invested abroad," it said.

CPF money is an indirect source of funds for GIC investments. It is invested in Special Singapore Government Securities, which guarantee a fixed return to residents while providing capital for GIC investment. GIC invests only in foreign markets.

The CPF Investment Scheme allows an individual to invest in selected shares, but only with money in the Ordinary Account.

"The Government should consider separating the CPF component and managing it differently as how pension funds are managed. This will free these funds... and will likely result in some investments in the Singapore market," the SBF noted.

This may help liven up the local stock market to provide "an important source of capital for enterprises, including our local enterprises, to fund their expansion", it added.

Lee Kuan Yew School of Public Policy research fellow Christopher Gee, however, advised caution: "The notion that domestic savings should be used to invest in domestic industries has a certain appeal, but it is inappropriate. The role of CPF is to provide guaranteed, zero-risk return to residents; investment in private ventures will expose the CPF money to more risks and fluctuation."

Securities Investors Association Singapore chief executive David Gerald added: "A CPF member would rightfully expect better returns on CPF investments. The overseas investments have, over the years, given better returns. The question is, can local companies give the same returns as overseas companies?"

The SBF also suggested efforts to create a more active bond market by lowering the bond denomination requirement to $10,000 from the current $250,000 minimum investment sum requirement.

JUST IN: Business leaders call for CPF monies to be invested in Singapore shares to help 'moribund' market.
Posted by The Straits Times on Tuesday, January 5, 2016

Call for GIC to invest CPF in local stocks stirs debate
Ultimately, the roles of the CPF and GIC cannot be conflated, say observers
By Cai Haoxiang, The Business Times, 8 Jan 2016

A PROPOSAL by the Singapore Business Federation (SBF) for sovereign wealth fund GIC to use Central Provident Fund (CPF) monies to invest in the Singapore stock market touched off a lively debate, with opinion split down the middle.

A number of observers panned the idea, which comes at a time when a government-appointed panel is due to recommend how CPF members can achieve higher returns through private investment plans.

They said that Singapore's market is too small to fulfil GIC's mandate to preserve Singapore's purchasing power by achieving long-term, diversified returns. They pointed out that the CPF scheme is meant to ensure retirement adequacy, so at least a portion should be ring-fenced and kept in risk-free investments.

However, local market participants were supportive, saying that institutions play a role in improving liquidity and valuations given the current stagnant market.

Esmond Choo, a senior director at broker UOB Kay Hian, said that the SBF recommendations are timely as Singapore Exchange (SGX) has been under pressure from regional competitors for years. The proposal to use pension monies to invest locally will professionalise retirement investing and strengthen local fund management capabilities, he said.

"A consistent monthly inflow of CPF monies can drive both primary and secondary liquidity, therefore improving . . . valuations of locally listed stocks. The expectation for valuation expansions will have a multiplier effect and may drive the inflow of foreign funds," he added. "New money seeking quality investments will hopefully improve the fundamental quality of local stocks."

Jimmy Ho, president of the Society of Remisiers of Singapore, said that while institutions have to base investment decisions on commercial grounds, there should be a "nationalistic" impulse to support the local stock market. "If the stock market is not doing well, it's not easy for the economy to prosper," he said.

But diversification will be important from GIC's perspective of achieving long-term returns, said Christopher Tan, chief executive of boutique retirement planning firm Providend.

"If you bought Singapore stocks last year and have not bought anything from Europe and Japan, you wouldn't have made money," he said.

Individual investors have to diversify between asset classes to minimise volatility, Mr Tan said. "You've got to put some in bonds - the man on the street either buys a bond exchange-traded fund (ETF) or an actively managed bond fund," he said.

Similarly, David Gerald, president and CEO of investor lobby group Securities Investors Association of Singapore (Sias), said that GIC should not be restricted to only local markets when investing CPF monies. CPF members will want good returns, and GIC will naturally want to diversify, he said. "Let them go for local investments that match overseas investments' returns," Mr Gerald added.

Bank of America Merrill Lynch economist Chua Hak Bin said that government involvement in the stock market is already very large through Temasek-linked companies. Investing CPF pension funds in the local stock market can boost it in the short term but end up removing liquidity instead, he said.

At end-2015, Singapore's stock market capitalisation is US$0.5 trillion, according to Bloomberg. This compares to US$23.5 trillion for the US, US$7.1 trillion in China, US$5 trillion for Japan, and US$3.4 trillion in the UK.

GIC does not disclose the size of its assets under management, but its latest annual report notes that it invests "well over US$100 billion" in a mix of developed and emerging market stocks, bonds, real estate and private equity across over 40 countries.

The Ministry of Finance's website said that GIC's mandate is to preserve and enhance the international purchasing power of government reserves. "As a rule, GIC's investments are outside Singapore and not in Singapore companies or instruments," it said.

SBF's investment proposal centres on the rule above. On Wednesday, the SBF, a business chamber set up by the government in 2001-2, released a position paper containing wide ranging proposals to make the Singapore economy more competitive.

Among them was a recommendation to "look into how our securities market can be made more vibrant and liquid, so that it can provide enterprises good access to capital".

In a proposal under the recommendation, SBF suggested that GIC should relax its overseas-only investment rule.

The proposal was for GIC to use CPF monies to invest locally. That infringed another rule: that GIC manages government assets in a single pool.

CPF monies, which are invested in special non-tradeable bonds issued by the government, form a part of the government's assets that GIC invests.

The rest of the government's assets that GIC invests includes proceeds from normal bond issues, budget surpluses and land sales proceeds.

GIC, which regards itself as a "fairly conservative investor", invests the pool "with the aim of achieving good long-term returns", its website said.

SBF said that the government should consider "separating the CPF component and managing it differently as how pension funds are managed".

"This will free these funds from the GIC investment restrictions and will likely result in some investments in the Singapore market. These investments will send strong signals on our market to other investment professionals," it said.

Joseph Cherian, practice professor of finance at National University of Singapore (NUS) Business School, said that he is not against the SBF suggestion. Yet SBF should not link GIC with the use of CPF to invest in local stocks, he said. "Linking the two confuses folks and sets alarm bells off unnecessarily," he said.

If the aim is to improve SGX's liquidity and vibrancy, there are two separate ways to go about it, Prof Cherian said. One is to improve the CPF Investment Scheme, which already allows members to invest in Singapore dollar-denominated mainboard shares as well as a number of mutual funds.

Fees can be lowered for investors, more low-cost local ETFs can be introduced, and more financial education given on how to invest retirement savings, he said.

The other is for GIC to loosen its mandate so that it can also invest in Singapore, he said.

Some also wondered if SBF's suggested method for companies to have better access to capital is sound.

Chan Chong Beng, chairman of interior furnishing firm Goodrich Global, said that listed companies get capital because they demonstrate a desire to expand, and not just because they are liquid.

"You cannot increase liquidity as a carrot for companies to expand. You give them more problems if they try to expand for the sake of expanding," he said. It is more important for local businesses to possess an entrepreneurial spirit and an "eagerness to move", he said.

Ultimately, the roles of the CPF and GIC cannot be conflated, academics said. NUS economics professor Chia Ngee Choon said that the intent of the proposals is to revive the lagging stock market, but the primary role of the CPF is to ensure retirement adequacy. "Such proposals must ensure that the primary role of CPF is not compromised," she said.

Gillian Koh, senior research fellow at the Institute of Policy Studies, said: "Those making such arguments may be better advised to look at growing and strengthening Singapore businesses more directly so as to attract true investment wealth in Singapore and from outside it, rather than to ask that ordinary Singaporeans gamble with their basic retirement safety net at any time," she said.

When contacted, GIC declined to comment. A Ministry of Finance spokesman said that the ministry is studying the recommendation.

Additional reporting by Kenneth Lim and Kelly Tay

SBF clarifies proposal on possible use of CPF funds
It highlights need for a livelier stock market so local firms can access bigger capital pool
By Wong Wei Han, The Straits Times, 9 Jan 2016

The need for a livelier bourse so local firms can access a bigger capital pool is behind the Singapore Business Federation's (SBF's) proposal to deploy Central Provident Fund (CPF) cash to invest in local shares.

SBF's chief executive Ho Meng Kit told The Straits Times yesterday: "Our main concern is that we need to put more emphasis on developing local enterprises.

"For that, our stock exchange needs to play an important part, to mobilise savings for investments, and to facilitate corporate sector growth."

But with fewer listings on the Singapore Exchange and less liquidity, it is perhaps time to remove some of the curbs on where the CPF money can be invested, he added.

Mr Ho was clarifying the SBF's position on its recent recommendation that the Future Economy Committee consider taking CPF money from GIC Investments and have it managed as pension funds that can invest locally.

The proposal has drawn criticism, with many cautioning that it will expose Singapore's national savings to more market risks.

CPF money is invested in Special Singapore Government Securities, which guarantee a fixed return while providing for GIC investments overseas.

Mr Ho stressed that the SBF is only proposing a removal of restrictions so that market forces can decide whether some of Singapore's $275 billion CPF savings can be invested in local stocks without changing the system's risk profile.

"There is some scope for the Government to use some - not all - of this money, to park it with institutionalised pension fund investors like other countries. The investments are not to be restricted to overseas or Singapore. We're saying, let the market decide, and hopefully more money will be invested in the local stock market... The key is that the money is still invested based on the mandate of the CPF Board, which is to ensure a fixed return to retirees. That is a given."

At the same time, the Government can try to develop institutionalised pension funds to handle local investments, which is the norm globally, he added.

About 87 per cent of the equities held by Australia's pension market are domestic, while only 30 per cent of Canada's pension funds are invested abroad, Mr Ho said.

Association of Small and Medium Enterprises president Kurt Wee also urged an open mind, saying: "I believe there is room for more liberalisation, to let the market play a more active role in a system dominated by blue chips and government- linked entities."

But Lee Kuan Yew School of Public Policy research fellow Christopher Gee is sceptical, saying: "Certainly, we need to be thinking quite hard about whether we are sending too much of our capital overseas... That's a valid consideration.

"But still, instead of what SBF proposed - instead of having to choose and hope that a pension fund manager can generate returns better than what the Government already gives - we can easily just allow GIC to also invest locally without tweaking the CPF system."

What it takes to get the economy buzzing
By Han Fook Kwang, Editor At Large, The Sunday Times, 10 Jan 2016

Ten days into the new year and it's turning out to be anything but new.

China's stock market crashed for the umpteenth time, Saudi Arabia and Iran resumed their historic hostilities, and North Korea made everyone nervous again when it detonated what it claimed was a hydrogen bomb.

Same old, same old? That's because there is still too much unfinished business that has yet to be resolved, and powerful forces are working to finish it their way. It all makes for a dangerous world.

The more anxious countries and peoples are, the more they build protective walls to shield them from their perceived enemies.

That's bad news for Singapore because, more than any other country, its livelihood depends on trading and connecting with a stable and thriving world.

Without these conditions, growing the economy will be hugely challenging, as indeed it has been the last few years with slow growth and uncertain business prospects.

It was good, therefore, to see the Singapore Business Federation (SBF) offering some answers of its own in its comprehensive report on the economy, which it released on Wednesday.

This is a worthwhile effort because government leaders and civil servants here are sometimes criticised for not understanding the concerns of the business world when they formulate policies. It is a valid criticism as not enough of them have real experience running commercial companies.

So when business people themselves take the initiative to study what ails the economy and propose solutions, they should be commended and their recommendations taken seriously.

(I was involved in a small way, helping SBF to edit its paper, but did not participate in its discussions.)

You can, of course, say they are likely to see the issues from their perspective as businessmen and employers, and their analyses and recommendation reflect this bias.

But better their active participation than to leave all the thinking to the Government.

They have made many sensible suggestions: doing more to help local companies succeed overseas as much as what the Government has done to attract foreign investments, and tackling the perennial issue of reducing business costs, among other things.

I hope some of these ideas work to turn the economy around and propel it into the next stage of its development.

But I fear that to really succeed, Singapore desperately needs one vital ingredient currently in short supply.

Ultimately, a dynamic economy depends on dynamic individuals with innovative ideas and the ability to turn them into workable businesses, and skilled, enterprising workers able to do their jobs better than their competitors.

Singapore lacks enough of these people.

That is why, of all the SBF's proposals, I believe the most important are those that have to do with developing a culture of entrepreneurship, and improving the skills and attitudes of workers.

If every Singaporean is an enterprising, confident, can-do person, the economy will sparkle, provided, of course, the country continues to be well run. But if the people are risk-averse, not self-starters, afraid to venture out of their comfort zones, there will be no buzz.

This isn't about everyone being an entrepreneur and starting his own business.

It is about people doing their jobs well, displaying initiative and enterprise in whatever they do and contributing to the well-being of the entire organisation.

That's what happens in the more advanced economies enjoying high living standards.

Over the last two months, I travelled to three of these countries - Japan, the Netherlands and Australia. They are all different with different economic structures but they have one thing in common: People there take pride in their work and perform their tasks, whatever they might be, at a high level.

The Japanese attention to detail is legendary but I discover something new on every trip I make there.

This time, I had left my luggage with the porter in the Tokyo hotel I stayed in to travel outside the city with a smaller bag.

When I returned a few days later to check into the same hotel and reclaim my luggage, I was told it was already in my assigned room.

Somebody had bothered to check that I was returning and made the arrangements.

Is it their training, education, culture, or what?

The Netherlands is like Singapore, with a small population and not much by way of natural resources. But this country of barely 17 million people is the fifth-largest exporter in the world after China, the United States, Germany and Japan - countries with populations many times larger.

It is the second-largest exporter of agricultural goods after the US.

I visited one of its greenhouses, the size of 15 football fields, producing cherry tomatoes, and I can't help but be impressed by how efficiently it is run with a small workforce.

It can happen only with a resourceful, highly productive people.

In Australia, I signed up for a day trip outside Brisbane but it was the tour guide who impressed most.

Bryan was driver, guide and problem-solver all rolled into one, giving a running commentary on the places we visited as he drove the 13 tourists under his charge.

He was in his 60s and working part-time, but he was a real pro.

Singapore needs to study how these societies have been able to develop their people to perform at such high standards throughout the economy.

It isn't only about the skill levels of individual workers.

As a society, they expect people to perform at a certain level, and it becomes the accepted norm.

So, individually and collectively, standards go up.

One further observation: In all these countries, people respect one another no matter what jobs they do and there are smaller gaps in wages between the top and bottom.

There must be something to this egalitarianism which contributes to the strength of their societies, and which is worth emulating.

How to develop this culture of respect, enterprise and self-reliance?

I hope future economic committees will dive deep into this subject.

Singapore's continued success depends on it finding the answer.

Singapore risks losing its leading edge: Panel
Large local firms can do more to help smaller ones amid fast-moving global trends, it says
By Chia Yan Min, The Straits Times, 13 Jan 2016

Singapore's economic transformation is moving in the right direction but the country is at risk of losing its leading edge amid fast-moving global trends, business leaders said at a conference yesterday.

They noted that large local companies can do more to help their smaller counterparts expand abroad, develop deeper skills and build a competitive edge.

The conference, organised by the Singapore Business Federation (SBF) at the Pan Pacific Singapore, centred on a position paper which the association released last week.

The 32-page paper, which contains key recommendations for Singapore's economic future, was officially presented to Finance Minister Heng Swee Keat at the conference. Mr Heng is chairing the Committee on the Future Economy, which will formulate plans for the next phase of Singapore's development.

The document contains 18 key recommendations, some of which have generated significant debate since its release last Wednesday. It calls for, among other things, the Government to review its foreign manpower policies and for workers' Central Provident Fund (CPF) monies to be used to help revive Singapore's lagging stock market.

The document was compiled from June to December last year after a series of discussions with 29 trade associations and about 70 corporate leaders, academics and economists.

Mr Heng thanked the business community for its "thoughtful" recommendations and said government agencies will take the ideas into careful consideration.

Some suggested strategies - such as developing Singapore into an economy unconstrained by its geographical boundaries, cultivating entrepreneurship in schools, and developing opportunities for the workforce to build deeper skills - are in line with the Government's priorities, he said.

The SBF solicited additional views from the wider business community at yesterday's conference, which was attended by over 400 representatives from trade associations, large firms and small and medium-sized enterprises (SMEs).

PwC Singapore executive chairman Yeoh Oon Jin, who was part of a panel at the conference, said many Singapore SMEs are too focused on the domestic market and might be losing out on global trends. "The mindset tends to be quite narrow... The way to fix this is to go on to the global stage."

Panellists said more platforms should be created to allow SMEs to collaborate with larger firms and to tap their expertise. A strong workforce will also be key, they noted.

Mr Han Fook Kwang, editor-at- large of The Straits Times and the final editor of the SBF's paper, said Singapore's economic transformation is moving in the right direction but the country still lacks a "deep appreciation" for skills across all segments of the workforce.

"We have not reached the same level of appreciation of each other's work as other advanced societies that have done very well, such as Japan, the Netherlands and Australia," said Mr Han, who was part of the panel. "There's a very high level of professionalism across a broad spectrum of their economies."

But in the shorter term, many firms are still grappling with the challenges of restructuring and costs remain a key concern, said Far East Organization chief executive Philip Ng, who was also on the panel. There is also a "unified cry" for more manpower in industries such as hospitality, construction and retail, as well as concerns that the pace of restructuring is too fast.

"We all understand where we need to go... but there are stresses in various sectors and in the businesses that we operate," said Mr Ng.

Singapore firms downbeat: Poll
By Chia Yan Min, The Straits Times, 13 Jan 2016

The uncertain global economic outlook has cast a pall over business sentiment in Singapore.

A survey out yesterday said only 48 per cent of companies expect to make profits this year while 54 per cent of respondents said they have been adversely affected by the downbeat economic climate, a much larger share than the 35 per cent in last year's poll.

Firms in the education, oil and gas and logistics and transportation sectors have been worst-hit.

In addition, 17 per cent of firms in the Singapore Business Federation's (SBF's) annual survey expect losses in 2016, up from 10 per cent last year.

Companies are also finding it tougher to obtain bank financing - 56 per cent of firms surveyed said bank loans are becoming more expensive, up from 47 per cent in last year's poll.

The latest poll also shows that companies continue to grapple with high labour costs, the uncertain economic environment and slow growth in sales. More firms are also being hit by project delays and customers pushing back payments.

The survey, which was conducted by DP Information Group in the last three months of 2015, polled 1,002 companies.

About 79 per cent were small and medium-sized enterprises, while the rest were large firms. Around 60 per cent employed fewer than 50 people. The poll was released yesterday at a conference organised by the SBF.

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