.jpg)
Singaporean Petroleum Company (SPC) should be a familiar name to most Singaporeans. The company was founded in 1969 and was the part owner of Singapore Refining Company Pte Ltd, founded in 1979. Its core business was the oil and gas industry and its roles included exploration, production, refining, supplying and trading. It took this Singapore firm many decades to acquire their assets, establish their distribution intermediaries and create a half decent Singapore brand that Singaporeans could be proud of. SPC was delisted from the Singapore Exchange on Oct 2009 when Chinese oil giant PetroChina completed its takeover of the Singapore firm. Everything gone. -Poof-
I knew because I who bought SPC in the high $3 range. As far as my memory could recall, SPC were trading high at $6.80 not long after the 2008 financial crisis that brought most, if not all, stocks on the SGX to their knees. SPC stood out from the rest with resilient, recovered and their stock price went up gradually in the right direction (at least for me). A lot of investors of SPC even commented online that they swore to hold their investments in SPC until retirement, because the rich dividends that SPC was handing out year by year had increased a few folds for these lao jiaos who bought their shares at a much lower price to a stage where a year's worth of dividends was as high as 20% of the original sum of money they invested. Most of them have already collected back their initial investment sum from the dividends paid by SPC over the years and their capital gain was 2-3 folds if they chose to sell up. Of course they wouldn't!
In the end all small time retail investors were forced to sell our tiny stakes in SPC in the $6 range when the China company took over and made SPC private once again. The little income stream for retirement for these Singaporeans went up in smoke. Yes, we should be glad we didn't make a loss and in fact, made a decent capital gain on our money down. We could always move on to investing in another company for the same purpose. Investors or traders should never put in emotions on their investments. These were mere paper and numbers and emotions would send us right to the door. I know all that and I was happy to grab the money and move on. But that is not the point I am trying to put across.
I considered a painstakingly set up local company like SPC a national asset. Singapore took decades to build that up, have anyone thought about that at all? What does anything that Singapore took decades to build up mean to each and every of you? Our security, goodwill and ... our home. How much of these is worth anything in Singaporeans' eyes if we look at everything as a business transaction? Are you able to recall the reaction of Australians when SGX threatened a hostile takeover of the Australian Security Exchange (ASX). Aussies gave their middle fingers and said,"Balls, mate." It was not Singapore's first brush in this nature. Temasek Holdings got into trouble with Komisi Pengawas Persaingan Usaha (KPPU) of Indonesia. Who could forget the ugly takeover of Shin Corp of Thailand where Temasek Holdings sent our money to ashes and lost everything, including faces.
"What's the problem? If we have more foreign investments, these countries will have a lot to lose and will come to Singapore's defence during a war." - Believe me, I heard this crap more than once from fellow Singaporeans. Will a pimp defend his prostitute, technically his money making asset, in times of trouble? Some brains gotta be fried and eaten fresh. At least they are more useful in that sense.
"What's the problem? If we have more foreign investments, these countries will have a lot to lose and will come to Singapore's defence during a war." - Believe me, I heard this crap more than once from fellow Singaporeans. Will a pimp defend his prostitute, technically his money making asset, in times of trouble? Some brains gotta be fried and eaten fresh. At least they are more useful in that sense.
Nobody bat an eyelid when SPC was sold. We didn't give a damn when PowerSereya, the entity which generate about 30% of Singapore's energy needs, was sold to a subsidiary of the YTL Corporation Berhad of Malaysia. Then we whine when our power bill goes up. What other assets were sold behind our backs? Not being an investor is not a valid excuse to be blind. Have you heard of Singapore's Free Trade Agreement with India, with our dear leaders putting down providing jobs for Indians as part of the conditions to coax India to sign up? Jobs can be sold too. I'm sure that is relevant to you now.
Open up the eyes, look around.
Open up the eyes, look around.
First off, I don't mean to be rude. With all due respect, you are wrong. There is nothing wrong with swapping one asset for another.
ReplyDelete1) "We could always move on to investing in another company for the same purpose."
Precisely. Comparative advantage. Singapore is moving up the value chain and leaving refining to those who do it better. Are you aware of the other state-backed Singaporean companies operating overseas? Hyflux? ComfortDelgro?
2) "Are you able to recall the reaction of Australians when SGX threatened a hostile takeover of the Australian Security Exchange (ASX)."
And without easy access to Asian capital, Australia is poorer for it. It will never be a financial centre now, with a one-tier economy centred on digging dirt.
3) "Have you heard of Singapore's Free Trade Agreement with India, with our dear leaders putting down providing jobs for Indians as part of the conditions to coax India to sign up?"
And what about the jobs created as a result of Singaporean companies moving into the Indian market?
It would not have mattered if the Indians had stayed in India. They would still have taken your jobs.
4) "Singapore took decades to build that up, have anyone thought about that at all? What does anything that Singapore took decades to build up mean to each and every of you?"
It means Singapore must be protected from populist pseudo-nationalists who don't understand economics, nor the trade-offs inherent to ruling a country.
Your hatred of the PAP is blinding you. Open your eyes.
Hey Han, please lah. You have been calling me a moron all over Facebook for months and now you are feeling shy? No need these formalities lah, bro. If you meant to be rude, don't say you didn't mean to. If there isn't due respect paid, don't say there is. Not that I am asking for any. No need for hypocrisy, now that you bother to make yourself to my turf. That's nothing more nauseating. I take it as you served NS bro? So just talk to me like a man. Don't act like ah qua ok. I'm not sorry for being honest.
DeleteThanks for making me see again. I took your advice, opened my eyes and saw a moron with the pseudo-PAP arrogance coming at me. I take it as you are not in this for a discussion then. To save you the trouble, you can summarise your comment in one single sentence along the line of, "You are a moron, I'm right and you're wrong." That'll save us the trouble.
=================================
Precisely. Comparative advantage. Singapore is moving up the value chain and leaving refining to those who do it better. Are you aware of the other state-backed Singaporean companies operating overseas? Hyflux? ComfortDelgro?
=================================
Glad that you agreed with me on a single point, though, I am restricting my views from the investor point of view only. From a business point of view, it makes no sense to sell a very profitable company to someone else because you think the new owner can run the business better than you. Your's the same ideals of hiring a maid to handle the menial tasks at home, so you can concentrate on making much more money elsewhere. I don't subscribe to this paradigm. If you realise, you are not alone on your perspectives but neither am I. You are right but that doesn't make me wrong, vice versa. The noobish mention of Hyflux and ComfortDelgro made me chuckle. Thanks bro.
=================================
And without easy access to Asian capital, Australia is poorer for it. It will never be a financial centre now, with a one-tier economy centred on digging dirt.
=================================
Tell the Thais they lost out the opportunity to expand their telecommunication network all the way to Australia. Never is a strong word. I'm not sure if Australia intended to be a financial centre at all. What makes you so sure that every country share Singapore's wet dream?
Since we are on thrash talk, I'd say digging dirt is far better than prostituting. The mining sector of Australia contributes to only 10% of Australia's GDP. I'm not sure if we can call that centering the economy around mining. With a GDP of US$1.57 trillion, Australia didn't do badly with its one-tier economy. Not bad for just digging dirt.
=================================
And what about the jobs created as a result of Singaporean companies moving into the Indian market?
It would not have mattered if the Indians had stayed in India. They would still have taken your jobs.
=================================
That finally cleared my doubt about the rumor that Indians invented teleportation but kept mum about it. My friend, pay Changi Business Park a visit to find out. If they are able to take our jobs anyway by staying in their own country, why are they whining over this? http://www.business-standard.com/article/economy-policy/govt-decries-ceca-violation-by-singapore-113021700123_1.html
So what about the jobs created as a result of Singaporean companies moving into the Indian market? I'm all for trade offs (see your last comment). Are we having a surplus or deficit here?
=================================
It means Singapore must be protected from populist pseudo-nationalists who don't understand economics, nor the trade-offs inherent to ruling a country.
=================================
I'm deeply humbled having a conversation with an economic genius and future ruler who will rule Singapore to their next Golden Age. For your information, I prefer governance over rule.
Hello there,
ReplyDelete1) My name is not Han. Perhaps you have mistaken me for someone else.
2) I didn't descend into personal attacks. Instead, I made four very concise rebuttals to your various points. You chose to be insulting. Others can judge for themselves.
3) It seems like your mind is made up. It's pretty sad, because I've been in Australia for a while. Over the years I've seen so many Singaporeans who've left, but are still so angry about Singapore.
I like to try to present an alternative view about Singapore. Perhaps it's not that bad after all. But if they enjoy wallowing in their hate with others, I probably shouldn't bother.
4) I don't think you know very much about Australia yet. Or how it's really doing. But never mind. You're in WA, right? Wait a few more years and you'll see.
5) "You are a moron, I'm right and you're wrong." I did put it a bit more politely, but when it comes to the economics, yes. Others can judge for themselves.
1) My sincere apologies for that.
Delete2) If you have started with the purpose of sorely presenting an alternative view about Singapore, I would be more than happy to listen.
3) If you didn't notice, your mind is all made up all the same. I don't know where the hatred and association with Singaporeans who hate Singapore came from. So a Singaporean only loves his country when he writes about nice things about his country? That makes you an Australia-hater? I don't think so. Alternative views are more than welcome, if you chose to leave out your preconceived personal opinion of me. You started with the personal attack dude.
4) My friend, I do not dispute the fact I know much about Australia. I appreciate the warning. May I respectfully ask you what is the purpose of this warning and what do you recommend I should do? Honestly I find your purpose here is not to educate, just to prove your "economics superiority"
Let me know if your next intention is coming back here to tell me "I told you so" Unfortunately this blog will probably not exist by then because I will be too poor to run it.
5) If you think you are right, why do you need the others to confirm it? Just go on and enjoy instead of wallowing in hate.
Hello there,
ReplyDelete1) I must admit that this was not the response I was expecting. You are more gracious than most and I appreciate that.
2) The reason for my initial post was that your story was gravely wrong. Singapore is not "stripping its assets" - in fact quite the opposite.
To return to the original question: why was SPC sold even though it was profitable?
Answer: SPC's profitability is irrelevant because 90% of its revenue was from domestic sales. Same with PowerSeraya.
Singapore's current industrial policy revolves around the aggressive expansion of state-linked companies into foreign markets. In contrast to operating in the protected domestic market, this encourages innovation, ensures competitiveness and helps them tailor their products to international preferences.
There was a period where they pitted the GLCs against each other domestically. Think Starhub vs Singtel. Or when SBS was given the NE line to run. That failed because it was far easier to run the show as a protected duopoly instead of genuinely competing for profits.
Why did I mention Hyflux and ComfortDelgro? Because 95% and 80% of their revenue is derived overseas. In fact all the GLCs on the Straits Times Index (excluding Keppel at 25%) currently derive about 70% of their revenue from overseas markets.
Same story with the recent liberalization of retail banking. Now ANZ, amongst others, is forcing the local banks to compete for deposits.
Expanding into overseas markets will create new jobs for Singaporeans which foreigners cannot (yet) fulfill and reduce our dependence on MNCs.
Thus far, some of these expansions have succeeded (CapitaLand etc) and others have failed, sometimes spectacularly.
But yes, the Government isn't stripping our assets. Believe it or not, they are listening and there is a plan for Singapore's future. But it needs time to be implemented.
Whether or not it succeeds is of course another matter.
3) That was just the impression I got on reading your posts. I'm glad that I was wrong.
4) Australia is uncompetitive and too expensive compared to the alternatives. Its economy is insufficiently diversified. The size of the mining sector is irrelevant, what matters is that it was the only sector attracting foreign investment.
James Price Point and Olympic Dam are gone, amongst others. The car industry is dead. The pipeline of new projects is shrinking, some say it has already stopped. But you are on the ground, you should know.
5) I don't need affirmation from others. But if people are going to hate the PAP, they should at least get their reasons right.
Hi,
DeleteIf you noticed, I did not mention a word about the economy of Australia in my post. I wonder if you will bring that up if I was never here and am writing this from a normal Singaporean's point of view. In case you have mistaken this as a Singapore/PAP bashing attempt, thus you see a need to highlight that downsides of the Australian economy, it isn't necessary because that would be irrelevant.
I don't mind sharing with you that I have been warned not to move to Perth in 2011 because the "economy was bad". Despite that warning, I went ahead for personal reasons. That does not indicate I have full optimism of the Australian economy. I do not disagree with your points because it is a no-brainer. Most of us here can list out at least 10 factors why Australia is uncompetitive off hand, we are not deluded.
Let's just discuss Singapore, as that was the original focus of the post. I have re-read my post and I am very sure about the message I was trying to convey. I did not write about expanding into the overseas market, not to mention disagree with that. In fact, it would be extremely short sighted not to do that because of our physical limits. There are some success stories (so far) which you cited and some terrible failings which Singaporeans would prefer not to remember. That's the nature of investments. You win some, you lose some. Fair play. I do not agree though, with Singaporeans being the beneficiaries of newly created jobs of this nature. That is a debate for another day.
That being said, overseas expansion and selling of local business entities is and should not be an exclusive relationship. I don't see the relevance on having one and not the other. Liberalization is good for competition, I strongly agree. But as far as I know, selling up companies is not quite the same thing as liberalization. Eg. Allowing any qualified companies to compete in the media market for example, is liberalization. Selling up SPH isn't. (Though I wouldn't weep over it if it happens)
I don't think it is a substantial reason to sell up a company like SPC based on your quoted reason: The majority of its revenue is from local source. If that was the case, many of our GLCs such as Singpost will fall into that bracket and should be justifiably sold. By selling a profitable business in SPC, we lost not just the company but also the oil&gas exploration rights to the buyer. Does that increase competition? Does that create more jobs for Singaporeans? In my humble opinion, no.
As I was an IT student, never was an economics student and never claimed to be an expert, please kindly fill me in with how the Government is listening and what is the plan for Singapore's future. Nevermind if we succeed or not.
"But as far as I know, selling up companies is not quite the same thing as liberalization..."
ReplyDeleteI'm not saying that selling SPC increases competition in Singapore. I'm saying that selling SPC and giving the funds to other companies operating overseas makes them more competitive overseas.
"By selling a profitable business in SPC, we lost not just the company but also the oil&gas exploration rights to the buyer."
Don't just focus on SPC. Or what was "lost". Consider the "gains" from freeing up funds to be used elsewhere.
The key is that SPC is just one horse out of many in the stable. It may have been profitable, but other assets were even more so.
Singapore's key priority is developing world-class companies. SPC was not doing as well internationally. Thus it was sold and the funds used to further develop the better performers.
You want your best champions out there fighting for you. Cull the weak to nurture the strong, everyone benefits. I don't know how to explain it more clearly.
"Does that increase competition? Does that create more jobs for Singaporeans?"
Not directly. But trace the indirect effects of channeling the funds elsewhere:
When better performers use these funds to innovate and grow on the international stage - this makes them more competitive.
When more international customers want the products these Singaporean companies can deliver - this creates more jobs for Singaporeans.
"As I was an IT student, never was an economics student and never claimed to be an expert, please kindly fill me in with how the Government is listening and what is the plan for Singapore's future. Nevermind if we succeed or not."
I've pretty much explained most of it already.
If they weren't listening, they wouldn't doing all these things. Why bother selling SPC when it's a dependable cash cow. Or experimenting with "competition" in the domestic market. Or expanding overseas. Easy to just sit back and depend on MNCs forever.
A brief outline:
1) Provide generous funding in an attempt to produce home-grown entrepreneurs.
2) GLCs to expand into overseas markets to provide jobs for PMETs.
3) Develop tourism and the service sector to provide jobs for unskilled workers.
10-20 years to implement, in the meantime, import cheap foreign labour to ease the transition. Short term pain but they obviously think this trade-off is bearable. The Government is many things but not evil nor stupid. They don't want to get voted out either.
Alright, I have posted enough here. Hope this helps you understand and good luck with everything.