Saturday, August 9, 2008

More business builders needed, not deal-makers

Business Times - October 11, 2002

A secure long-term futurefor Singapore Inc can only be assured with GLCs leading the charge abroad and grooming promising intrapreneurs

By Ong Yong Hwee

THE Great Singapore Asset Sale is here again. This time, Singapore's 96-year-old bookstore chain icon, MPH, has been sold by deal-maker Simon Cheong to a Malaysian firm owned by Syed Mokhtar of Tanjung Pelepas fame.

Before this, there have been many other solid Singapore entities, built up painstakingly over the years, which ultimately ended in the hands of foreign firms.

These companies include NatSteel Electronics sold to Solectron, Omni Electronics to Celestica, and JIT to Flextronics. NatSteel is now up for grabs, foreign parties not excluded. 98 Holdings, a high-powered investment company which has just put in a bid for NatSteel, has among its shareholders a subsidiary of Standard Chartered Bank and a foreign fund management group.

These deals may at times appear sexy when there are buyers who are willing to fork out a handsome sum for the business; after all, it is part and parcel of modern-day business dynamics. However, the Republic cannot rely on this type of deal-making to build a robust economy and create a secure future for Singapore Inc as a whole.

Instead, we need long-term business builders, rooted to Singapore, who have the vision and the courage to own and build business systems that are amongst the world's best - especially so since the Singapore domestic market is uniquely small.

The cost and market attractions of North Asia, particularly China, are pulling away numerous multinational companies (MNCs) operating here, particularly those in the electronics manufacturing industry. If, one day, Solectron, Celestica or Flextronics were to completely pack up and leave, that probably would be the last of the value-added activities that the Republic could receive from these companies.

Since private sector companies in Singapore could be classified as 'stayers' or 'quitters' in the sense of staying Singapore-owned and rooted here, it therefore falls on the government-linked companies (GLCs) to carry the baton and ensure a long-term economic commitment to Singapore. The GLCs are collectively Singapore's key economic stalwart - as business builders for Singapore. Who else is better able to take the lead in creating employment for the 6 per cent well-trained but unemployed, many of whom have been laid off by MNCs now eyeing the greener pastures of North Asia? And which other entities have the financial muscle, talent and resources and are amongst the most prepared to venture abroad in a big way? And who else can we count on to have permanent roots in Singapore?

For all the debate about the way forward for GLCs (divestments, avoiding competition with local entrepreneurs, etc), it is the GLCs who are Singapore's assured stayers and provide the best bet for Singapore's long-term economic future. The GLCs should move forward affirmatively and take the lead to find niches in the global value chain, beyond the sheltered shores of Singapore. They should do so confidently and at the same time bring along Singapore private enterprises, so that the strong partnership from a large grouping has a better chance of succeeding in the huge wide world.

GLCs must adopt a 'thick-skinned' approach and not shy away from pursuing attractive business opportunities, strategic or otherwise, as the competition is really from without, not from within, Singapore. Ignore the Economic Review Committee's 'Yellow Pages' ruling especially when you are doing business overseas. This rule suggested that government-related companies should stay out of any business which is, or could be, provided by the private sector.

Valuable time and resources should not be wasted selling off viable but non-strategic businesses. Instead, GLC management should direct their efforts to harness the resources of Singapore Inc (including local enterprises) in a Japanese sogo shosha (general trading houses) manner, to explore opportunities beyond our shores.

Given the condition of the world's economy, it is far easier and faster to promote risk-averse Singaporeans to work in GLCs as intrapreneurs. Give them the power to map out the destiny of the company based on what makes business sense, but not the absolute power to uproot the linkages from Singapore. And when the intrapreneur decides to be an entrepreneur, encourage them - but not by selling them the businesses that the GLCs have taken risks on and successfully built.

There may be some truth that managers in government-type organisations don't make good businessmen. This may be partly due to the philosophy and nature of the GLCs, which may have 'asset preservation', 'national brand name' and 'strategic considerations' to juggle along with business interests. As GLCs and Singapore companies explore new territories overseas whether separately or hand-in-hand, the various parties will have to continue to find their own brand of entrepreneurship, risk-taking and reward benefits.

Time should be spent to find and nurture professionals within GLCs to be potential intrapreneurs. The real test of business acumen is when GLCs taste success in the overseas market and not within the small controllable local market. The reward system for intrapreneurs should be based on long-term business development ability and can be tied to incentives beyond their GLC careers. This is to ensure that whatever business decisions are made are for the long-term benefit of the company and not for the short-term share price gain where the intrapreneur can cash out. This way, we can avoid the problems of short-term incentives that have affected world-class companies like Enron, WorldCom and Tyco.

In fact, bring in the Singapore populace into the long-term business-building equation. For example, it would be more meaningful if a basket of GLC shares were given to Singaporeans instead of the current Singapore Share Scheme. Like renowned long-term investor Warren Buffett, who owns Coca-Cola shares and drinks his Coke wherever he goes, Singaporeans can have the same sense of attachment with GLCs share ownership.

With intrapreneurs in GLCs, entrepreneurs in Singapore enterprises and the Singapore populace linked as long-term business builders of Singapore, Singapore's long-term economic future is better assured, and with it, the Republic can be assured of far more economic stayers than quitters.

(The writer is a mechanical engineer by training and a business consultant by profession with CEO Search & Services)