Singapore Business Review

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sg property: GOING TO EXTREMES what’s cooking with rice?

M1’s goliath fibre plan Richard branson:

the ceo is not always right

SG Banks step in where US banks fear to tread

tim hamlett:

Business intelligence?

Thai economy: goodluck or yingluck?

Bribers beware: british bobby’s could nick you

Singapore’s 5 best steakhouses

MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

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*If you’re reading the small print you may be missing the big picture

Keep your clients close, and your loans closer One of the things that got Europe into such a mess was its banks lending money to other countries.

When a bank loans money domestically it usually has a better idea of the credit risk of that loan and generally the total amount of loans made is in line with the size of the economy, which makes it easier for a government to lend assistance to a domestic bank if it gets into trouble. It is also more palatable to help a domestic bank if its bad loans were to a domestic company than if the money was lent overseas.

One interesting change to the dynamics of Singapore’s banking system over the last two years has been the rapid rise of Singaporean banks lending money overseas. This has been mainly possible because many European and American lenders, who once loaned money to these clients, have not had to pull back due to their own balance sheet problems, leaving Singaporean banks to step in to make those loans. But it also exposes Singaporean banks to credit situations entirely dissimilar to those faced in Singapore where generally companies are better regulated and the economy is on a firmer footing and not as subject to rapid changes as other ASEAN Nations.

There is no right or wrong number for both the amount of money that a domestic bank should lend overseas compared to locally, just as there is no right or wrong answer as to how big a loan book should be compared to the deposits on hand. But in Singapore banks are making loans at a faster rate than they are attracting deposits and the loan to deposit ratio is at the highest it has been at some time.

This is not a major concern now, but if left unchecked it could be, especially if overseas economies falter and bad (overseas) debts rise. Ratings agency Fitch has already raised the alarm bells on Hong Kong banks lending to mainland Chinese companies. Singaporean banks may like to take note.

7/30/08

11:05:28 AM

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SINGAPORE BUSINESS REVIEW | OCTOBER 2011 3

CONTENTS

24

analysis What’s cooking with rice?

ANALYSIS 24 What’s cooking with rice?

Prices are rising at the wrong time for Asia

FEATURE 38 Worthy of investment

Importance of healthcare and its fair share in everyone’s investments 44 Good credit management The key to keeping cash flowing

EVENT

OPINION

22

residential property: Going to extremes

16

regional economy briefing goodluck or yingluck?

FIRST

20 How to keep the top guys in your

14 SG banks step in where US banks fear to tread

team 21 Take a look at the current hiring trend

16 Goodluck or Yingluck?

22 Residential property: Going to

18 M1’s Goliath fibre plans

extremes

27 The CEO is not always right

REGULAR

32 Asia targeted by Russia

28 Numbers

36 Business vs Politics

48 Life and Style

46 Why Groupon creates no loyalty,

50 Last Word

but Foursquare might

47 Challenging SG’s hoteliers

SBR Hotel & Hospitality Insights Conference

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road

For the latest business news from Singapore visit the website

REPORT

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EVENTS

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by Aspermont Limited and Beacon Events also reaffirms Hong Kong’s position as the trade fair capital of Asia.

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News from sbr.com.sg Daily news from Singapore SG knocks down economy and social media most read TELECOM & INTERNET

Now we know why Vodafone is dropping M1 There’s no better way to spell competition, as StarHub will become the exclusive partner of Vodafone exactly the day after its deal with M1 ends.

In a release, StarHub and Vodafone announced that they have agreed to form a strategic partnership that will bring world-class mobile services to enterprise customers in Singapore, with unique Vodafone Global Enterprise services and an extensive global mobile footprint.

StarHub will become the exclusive partner of Vodafone in Singapore with effect from 1 January 2012.

TELECOM & INTERNET

Accessing the Internet through PCs will soon be a thing of the past Around 95% of Internet users in Singapore get online through personal computers, but a new survey reveals that a growing proportion are turning to alternative devices.

Data from Nielsen as per request by Singapore Business Review show that currently 3% say their mobile phone is their primary means of accessing the Internet but about 6 out of ten (59%) indicate that they would access the Internet via a mobile phone.

Starhub partners with Vodafone Aviation

Singapore Airlines finally discovers social media, so what’s next?

It surely has a lot of catching up to do to make the most of a Facebook fan page, including integrating a search and booking engine.

In an e-mail to Singapore Business Review, SIA spokesperson Jill Ng said that the firm considers allowing Facebook users to book flights with them via the social media site to keep pace with the growing competition among international airlines.

economy

Asia reigns as regional economic powerhouse And guess what three countries were picked by Singaporean executives as the most promising markets for growth?

Allen & Overy’s survey showed that Singaporean business leaders overwhelmingly view China as the most promising market for growth opportunities, with 65% of Singaporean respondents placing China in their top three growth markets -- 53% of respondents picked India, and 21% picked Vietnam.

BTO Flats RESIDENTIAL PROPERTY

8,200 BTO

HDB launches 8,200 BTO flats for sale This is the largest supply of flats in a single launch, offering a wide array of choices across flat-types in both mature and new towns.

residential property

Should you go for shoebox units?

Shoebox units have become increasingly popular among local property buyers, accounting for 7% of the total transaction volume for condos this past year. iProperty.com.sg revealed staggering figures reaffirming the popularity of shoebox units among local property buyers.

Shoebox units are generally defined as private apartments measuring less than 500 sq ft.

ECONOMY

Beware of technical recession ahead, warns analyst

What will be the future of accessing the Internet?

8 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

Standard Chartered says a technical recession could affect some Asian economies, like Singapore and Hong Kong, by the end of 3Q 2011.

News from sbr.com.sg Daily news from Singapore Would you want to work in Singapore? most read MEDIA & MARKETING

Bored Singaporeans the world’s heaviest Facebook users Time to get a real life as study reveals that Singaporeans spend the longest time on Facebook worldwide, averaging 38 minutes and 46 seconds per session.

An international analysis on the use of social networks by Experian reveals time spent on and share of visits to various online channels, share of and traffic drivers to and from these sites.

Singaporeans emerged as the global leaders for the longest time spent on Facebook, with an average of 38 minutes and 46 seconds spent per session. Local interest in the social networking site also continued to increase between August 2010 and August 2011.

HR & EDUCATION

What does it take to get the best employees in Singapore?

Companies are having to offer salary increases of 15-20% because of the skills shortage.

The Michael Page Salary and Employment Forecast reveals that 63% of employers believe a professional skills shortage will impact their business over the coming year. Of these respondents, 73% think the tight labour market will cause salaries to rise at a level exceeding the rate of inflation.

Singaporeans-- heavy Facebook users telecom & internet

M1 says no bitterness over Starhub-Vodafone partnership M1 is also quick to defend itself over assumptions that the termination of its contract with Vodafone effective December 31, 2011, will bring significant losses to the company.

The telco’s senior communications manager Petrina Teoh reiterated that M1 and Vodafone have “mutually agreed” to not renew the partnership and the entry of StarHub into the scene has nothing to do with it.

residential property

Atrix at Aljunied almost sold out in two weeks Only three of its 59 units are left unsold-to-date since it previewed last September 7.

Units still available include two warehouses and one ancillary canteen, said marketing agents at Huttons Real Estate Group.

According to marketing brochures, a warehouse of around 1,302 sft is being sold for $1,100+ psf. The canteen of about 1,787 sft in size meanwhile is put up for sale for almost $1,000 psf.

“I’m loving my job!” hr & education

10-30% Want to know

how much salary raise you can get in Singapore?

Robert Walters Singapore reveals that salary increments in the Lion City range between 10-30% across different sectors.

Hiring activity also seems to be robust in most sectors throughout 2011.

aviation

Singapore Airlines and Silkair strike deal with Changi Airport Collaboration aims to offer tourists affordable travel packages as low as S$60.

Singapore Airlines and SilkAir have partnered with Changi Airport Group (CAG) to offer even more value-packed holiday deals that show off the best of Singapore. Under the global tie-up, customers of Singapore Airlines and SilkAir will be able to enjoy attractive hotel rates with Singapore Stopover Holiday packages, priced from as low as S$60.

ECONOMY

Risk of technical recession rises

Winners are grinners

10 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

Inflation also remains significantly higher than the historic average despite increasing downside risk to economic growth, says economist.

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For bookings or more information, please contact: Ms. Lisa Tan Phone: 6879 1979 Email: business_development@turfclub.com.sg

co-published property report

Experience signature living at The Viridian

“Modern comfort, functionality and metropolitan chic are blended into each of The Viridian’s exclusive lifestyle apartment pads.”

The Viridian is designed to be an appealing urban sanctuary for modern urban sophisticates and professionals who wish to reside in quality homes that are located conveniently on the city fringe.

P

oised to become an iconic tower of signature living amidst a mixed composition of charming historical shophouses and modern residential and commercial properties in the heritage-rich Balestier precinct is The Viridian.

Spanning a site area of approximately 27,838 square feet, the freehold development made its debut recently this year and marks Global Orion Properties’ maiden premier residential project, which follows the real estate developer’s portfolio of successful, contemporary-styled industrial developments.

The Viridian caters to the residents’ enjoyment of life’s finest in their very own retreat with all the creature comforts aptly provided and is surrounded by a variety of eateries, shopping and entertainment outlets within the Balestier vicinity. This precinct is undergoing an enriched transformation that will position it as a much desired premium residential enclave. It will have new developments like the upcoming Zhongshan Park project that will encompass hotels, residential and commercial buildings and a 0.46 ha park with refreshment areas and tea pavilions.

The Viridian is just a short distance away from the Novena and Orchard shopping hubs, and travelling to other parts of Singapore is accessible via the public transportation network. It is within easy reach to the Central Expressway (CTE) and Pan Island Expressway (PIE), and the Novena and Toa Payoh MRT stations.

The epitome of classic and elegant residential living, The Viridian is designed by renowned and innovative Singapore-based architectural firm Ong & Ong Architects. Standing at 23 storeys tall, The Viridian comprises a total of 108 stylish apartment units, with sizes ranging approximately from 500 to over 3,300 square feet. The property will have 22 onebedroom units, 44 one-bedroom & study units, 16 one-bedroom loft & study units, 22 two-bedroom & study units, two three-bedroom units, as well as two penthouse units.

Apart from quality fittings and finishes, each apartment will be fitted with a Digital Door Security System for enhanced security and will feature wellequipped kitchen that comes with quality kitchen cabinets and appliances such as oven, electric cooker hob, cooker hood, fridge, washer and dryer.

With its meticulously-crafted ebony frame and dark tinted glazing, The Viridian is an outstanding development that makes a striking impression in the Balestier skyline. It will redefine living spaces with its modernised yet unique concept of a fusion of colours, graphic and motifs. These sensory spaces create appealing habitats that evoke vibrancy and a sense of relaxation and comfort at the same time.

True to the Latin origin of its name which means “green”, The Viridian is embellished with lovely

lush landscaping that integrates the serene beauty of nature with architectural excellence of modern residential living. Luxuriant circular trellises of undulating green adorn the entire length of the site to form an impressive urban signature that is a wavy contrast against the apartment tower with light filtering through the trellis’ creepers in the evenings. To further complement the look and feel of the property, residents will be welcomed by a black stone textured water feature at the luxurious black granite foyer which leads into the luxurious lobby.

Decked in soothing colours to aid relaxation and enhanced with picturesque greenery and scenic city vistas, the Sky Lounge on the sixth floor is a recreational terrace with amenities such as a lap pool, Jacuzzi, state-of-the-art gym, reading area, putting green, barbeque pit and dining area, thus creating an idyllic environment for residents to entertain friends or simply to unwind.

Modern comfort, functionality and metropolitan chic are blended into each of The Viridian’s exclusive lifestyle apartment pads that redefines residential design with amazing live-work-play spaces to include the convenience of attached work spaces.

Selected one-bedroom loft units will be furnished with a Jacuzzi on the roof terrace where residents can take a relaxing dip while enjoying the breathtaking scenery. Luxurious living indulgence is enjoyed to the fullest at The Viridian’s penthouses as each of the two exclusive units is fitted with a private pool and Jacuzzi on the roof terrace, and comes with wet and dry kitchens for culinary delights to be created and relished. The Viridian’s stylish interiors are further accentuated by the building’s glass façade which enables residents to appreciate unobstructed views of the city and surroundings.

Temporary Occupation Permit (TOP) for The Viridian is expected to be obtained in 2015.

FIRST

SG banks step in where US banks fear to tread DBS profits are impacted by 2.5-3.0%, compared to 2.0-2.5% for UOB/OCBC.

unable or unwilling to loan more money in Asean, Singapore banks are stepping in and loaning Singapore dollars to companies outside of Singapore.

Are Singaporean banks becoming Are Singapore’s three main banks too levered? prepared in the face of a potential Although the spread between system slowdown? loan growth and GDP growth is near According to Mr Swaminathan, at previous cycle highs, it is still below least at the outset, UOB has, by far, the levels seen in 2006-07. But one the most conservative loan growth worrying sign is that Singaporean to potentially risky sectors and has banks are at near ten year records of a better cushion from conservative loans to GDP - perhaps caused by provisioning during the cycle. DBS more overseas loans, but neverthless profits are the most sensitive to rising it does leave Singapore’ s banks credit costs among Singapore banks: Macquarie Research Singapore banks exposed to credit situations outside of for every 5 bp rise in credit costs, DBS Singapore over which they may have profits are impacted by 2.5-3.0%, less control. Mr. Swaminathan noted compared to 2.0-2.5% for UOB/ Volumes should act as a partial offset of the reduced NIM assumptions. Loan growth in Singapore on thathasthe main factors OCBC. OCBC a YTD basis consistently been verycontributing strong. Accordingto to the MAS’s monthlyBut statistics, whichhas we the most upValuations already discounting use as an imperfect indicator of growth for the three banks, overall loans expanded by 28% YoY. this trend are the increasing pace of side risk and it has also been the least This was driven by a sharp rise of demand for corporate loans, which were up 36% YoY in July. in credit inter-ASEAN trade and the drying spike conservative amongcosts Singapore banks While we still believe loans growth will slow in 2H11, the strong YTD numbers and pipeline of Valuations banks globally have been underthrough pressure given the current of US$ liquidity inloan thegrowth restassumption of Asia. in for boosting coverage levels property up projects leads us to raise our for 2011 once again, from the uncertainties. banks previous 14% to 19% YoY. We leave our 2012 forecast unchanged at 12%,While whichSingapore is optimistic givenhave slightly outperformed the NJA In essence, with the American Banks general provisioning, he added. recently, their P/Bs are now the third cheapest in the region. the higher base.

Figure 38: US$ MSCI bank indices—three-month absolute

priceyielding performance (%)of 82% Figtwice 7 Loans by of twice the pace in of deposits in July, LDR Loans grew by thegrew pace deposits July, yielding a LDRaof 82% 15

12 Loans out grew deposit s (+28%vs. +14%YoY)

10

15%

0

5%

-8

Source: MAS, Macquarie Research, September 2011

Singapore banks' overseas exposure has always been a key factor during financial crises. Let's check out how the banks are faring recently in terms of their exposure.

DBS: Singapore asset quality worsened during all the past asset quality stress episodes. Hong Kong and ASEAN exposure behaved relatively better during 2008-09, but was offset by worsening asset quality exposure in the ‘rest of the world’ (mainly Greater China, Europe and the Middle East). While DBS is now more conservative with its ‘rest

Source: MAS, Macquarie Research, September 2011

-25

KR

TW

NJA

HK

2.0

-5

1.5

(5%)

-10

Loan grow th (YoY) 2 year Average LDR

CN

-7-% -6

1.0

Jul-11

-16

-19

-10

Jul-10

-20

-12

Jul-09

Jul-07

Jul-06

Jul-05

Jul-04

Jul-03

Jul-02

Loan-to-deposit ratio (LHS) Deposit Grow th (YoY) Long term average LDR

-15

Jul-08

-10

65%

2.5

10%

-5

4.0

3.0

2

20%

85%

Figure 39: Asi

3.5

25%

5

75%

10

30% YoY Growth (%)

95%

Singapore’s Big three

14 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

In typically conservative management style, UOB has not been willing to become overly leveraged on its USD book, which we think is now at slightly higher than 100%,” he added.

Jul-01

With the recession almost upon us, how is Singapore faring after 3 years of heavy loan making? Well, it’s actually not that bad.

Anand Swaminathan, an analyst at investment bank Credit Suisse, noted that though there are talks of a banking sector asset quality stress, things are still manageable as the headline banking system’s 28% loan growth is misleading. “The aggregate DBU+ACU system loan growth is a much lower 17% YoY; although this is high by Singapore standards, the gap over nominal GDP growth is not very high compared to history.

DBU+ACU loan growth is currently 17% YoY compared to the headline DBU loan growth of 28% YoY,” he added.

Macquarie Bank analyst Matthew Smith also noted the strong loan growth based on a sharp rise from corporate loans but stressed that loan growth will slow in the second half of the year and the final figure will be 19% annualized growth. “While the data is not transparent, discussions with the bankers lead us to believe that roughly one third of loan growth has been USD-denominated RMB trade finance lending. We do not think this will prove to be sustainable in the longer term given funding issues. Specifically, high LDRs of close to 150% at DBS and OCBC should limit the ability to continue such heady growth in the short term as the banks seek medium term financing.

1.2 0.9

0.5 0.0

IN

SG

MY

AU

PH

ID

TH

Source: Factset, Credit Suisse estimates

KR

TW

Source: Factset,

P/Es already at previous crisis lows; P/Bs stil

some to that goroughly one While the data is not transparent, discussions with the bankers lead usway to believe third of loan growth has been USD-denominated RMB trade finance lending. We do not think this will P/Es are already below 2001-02 and 2003-04 lows. While this is par prove to be sustainable in the longer term given funding issues.

Specifically, high LDRs of close to of the world’ exposure, the focus this uncertainties around net interest margins and capital market-related income 150% at DBS and OCBC should limit the ability to continue such heady growth in P/E the short term as 12-mth (x)—historical crisis investorsforward are already assuming a spike in credit costs similar to previous cris time could be on its exposure in Greater the banks seek medium term financing. In typically conservative management style, UOB has not lows been willing to overly the leveraged on its USD book, which we40: think is now at slightly higher China (in which it become has been most Figure 12-mth forward P/E (x)—historical crisis lows Figure 41: Cu than 100%.

15 DB

'98-'99 '0 1-'02 '0 3-'04 '08-'09 Current aggressive among Singapore banks) and 30 13.2 On the other hand, we have been calling for loan growth to slow since March, and it continues to 12.5 India (UOB/OCBC have So noweexposure). surprise on the upside. have to admit that there could be upside to this number as the latter 20 11.2 12 10.7 banks seek medium termThailand) USD funding in 2H11. Furthermore, we believe that upcoming UOB:two ASEAN (especially 10.5 10.3 10.2 10 government land sales in Singapore, which we think are intended to cool the domestic property 9.6 exposure has should beenprovide a key of 8.7 developers in 2H11 and market, for source financing opportunities to corporate9property 7.9 0 7.8 7.6 We are thus not expecting a sharpThis slowdown in corporate loan growth overall. concern2012. during previous episodes.

7.1 6.3 -10 5.7 could again be the focus when the -9 6 -20 current cycle turns as UOB has been -18 3 actively growing its ASEAN loan book -30 of late.

-40 0 OCBC: ASEAN exposure has been a DBS UOB OCBC -50 key source of concern during previous Source: Datastream, Credit Suisse estimates Source: Datastre Source: Datastream, Credit Suisse estimates episodes. Key areas of concern could be Singapore banks’ trailing P/Bs, although near two-year lows, are still above crisis lows. The fall below 1x P/B for all three banks during the 2008-09 cris its ASEAN and Greater China (OCBC has been aggressively growing its US$ trade finance book) exposure.

Singapore Banks Sector

8 September 2011

4

adopted monetary policy inflation targeting. The 12mma breached 4.5%, the proposed new upper band, twice during this period – once in 2006 and once in 2008, largely due to surging energy prices. Thus, historical evidence suggests that targeting headline inflation is likely to lead to a more volatile policy interest rate over the long term. An oil-price shock would further complicate the BoT‟s policy decisions.

regional economy briefing - Thailand

Movements in headline inflation since May 2000

Chart 1: CPI basket

2: Movements in headline inflation since May 2000 %Chart y/y, 12mma

% weightings

% y/y, 12mma

80

7

70

6

60

5

Upper band of proposed new target

4

50

3

40

2

30

Lower band of proposed new target

1

20

0

10

-1

0

-2 Energy

Raw Food

Core CPI

Apr-01

Apr-03

Apr-05

Apr-07

Headline inflation Apr-09 Apr-11

Sources: MoC, Standard Chartered Research Sources: MoC, Standard Chartered Sources: MoC, Standard Chartered Research Prime Minister of Thailand, Yingluck Shinawatra Research GR11SE | 11 October 2011

Goodluck or Yingluck?

It has been three months since Thailand elected a new government headed by Thaksin Shinawatra’s sister Yingluck. So how is the economy faring?

What’s the big picture?

Thailand seems to have decided not to raise interest rates as they believe that doing so will threaten the economy.

Su Sian Lim, an economist with the Royal Bank of Scotland returned from meetings with the Thai Central bank mid October and noted that, in her view, the BOT is done with rate hikes for now.

“The central bank expressed comfort with a policy rate of 3.50%, and believes that at this level, rate hikes or cuts will make an impact on the economy. Our call for a pause is a reversal of our hawkish view in August when the central bank surprised us by tightening further still, but the deterioration in global financial market conditions, and to a lesser extent, economic data since then must be taken into consideration,” she said.

What about the floods?

Pretty bad but survivable. Ms Su noted that whilst she was in Bangkok, the floods were only just starting to get serious, and so discussions revolved more around global rather than domestic issues. “Electronics sector activity was seen as moderating on the back of weaker G3 demand; resource-based exports were also seen weakening, though the view was for greater resilience here since these exporters had adjusted more to emerging-market demand,” she added.

Still, in late October, Thai finance minister Thirachai said that the floods could retard economic growth by 1 to 1.7%.

Fred Gibson, an analyst with Moody’s Analytics, noted that the worst flood seen in decades was expected to cost the economy US$1.9 billion and curb some industrial production. “This will be disheartening for Thai auto and 16 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

2

electronics manufacturers who have only just recovered from Japan-related supply chain disruptions ,” he noted.

Usara Wilaipich from Standard Chartered also noted that over 8.6mn rai of the country’s total farmland of 122.2mn rai has been destroyed. “Including damage to highways and rural roads, the BoT estimates the initial cost of the flooding at about THB 60bn, or about 0.6% of GDP,” he noted.

Worries about a debt bubble?

One concern on the horizon is the massive boom in credit in Thailand which is helping to fuel all this domestic consumption. There is also worry about banks making too many bad loans. According to Ms Su, whilst the BOT went to pains to emphasize that most banks are generally well capitalized, it is watchful over the risks that rising household debt could potentially have on the financial system in the medium-term.

Ms Su noted that banks were getting quote leveraged in Thailand, as were Thais in general. “Banks’ loan-todeposit ratios currently average at around 87%, even after adjusting for Certificates of Deposits. Another worrying statistics: according to the BOT, Thais currently use a relatively high 40% of their disposable income to service debt. By our estimates private-sector credit growth has averaged 18%YoY year-to-date – 2.5x nominal GDP growth and the fastest pace in two and a-half years,” she said.

How will this affect inflation?

It could add 1% to the annual average headline inflation forecast of 3.2% for next year. Ms Su noted that this does not yet take into account the impact of the floods, nor the proposed government plan to cut the corporate tax rate to 23% from 30% currently.

Standard Chartered also noted that the BoT plans to shift its inflation target to headline inflation from core inflation. “Historical evidence suggests that changing the inflation target to headline inflation leads to more volatile policy interest rates over the long term,” added Standard Chartered.

abacus

Goh Choon Phong, CEO of Singapore Airlines

Karen Kooi, CEO of M1

M1’s Goliath fibre plans M1 is cutting the cheapie deals as it plans its own network to compete head on with SingTel and Starhub

T

elecom company M1 may be the smallest mobile phone operator in Singapore, but this little David has Goliath plans for fibre broadband. It hopes to compete against SingTel and StarHub by building its own Next Generation Broadband Network.

But why now? According to analysts at CIMB, equipment costs have fallen from $200 to $80, making it more affordable for M1 to offer its own residential services, and access costs could be cut

by S$6/month and S$25/month for the residential and commercial portions.

M1 is already signalling its seriousness in Fibre broadband.

It’s current fibre plan offers are already lower than that of their competitors. In fact, its 100 Mbps fibre plan is priced at a two-year contract of $59/month, which is still relatively lower than SingTel’s $69.90 and StarHub’s $68 value deals.

M1’s corporate communications manager Petrina Teoh told Singapore Business Review magazine that M1 also posted pretty good profits for the third quarter to September 2011, up 5.6% to S$126 million.

Ms Karen Kooi, M1’s Chief Executive Officer said, “We deployed our own active network for the Next Generation Nationwide Broadband Network during the quarter. Based on the current outlook and barring any unforeseen circumstances, net profit after tax for 2011 is likely to improve, compared to 2010.”

When will Scoot scoot?

The rumour mill has been in full swing over what is happening with Singapore Airlines’ new long haul budget carrier, putatively known as Scoot. SIA’s PR flacks issued a statement to Singapore Business Review that reports they were to operate 4 planes by April next year were not firmed up “to date”. Still, it’s not exactly a denial. “We don’t have definite schedule of first flight yet as everything is still in the planning stage. We don’t confirm anything

18 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

mentioned in the report,”said Audrey Tan of SIA’s unit New Aviation.

The report was one in the Straits Times which said that Scoot would expand to 14 Boeing 777’s by 2016. It is something of a shibboleth in aviation circles that ever expanding fleet numbers is always a good thing. But unfortunately, the stock analysts don’t always share the same views.

OCBC Investment Research has warned that SIA may be in danger of expanding its fleet too quickly at a time when demand is slowing. It noted that with a 76.6% passenger load factor in August, the airline may continue to suffer drops if it doesn’t stop increasing capacity. “SIA may continue to experience falling passenger load factors if it continues its 5% capacity increase for the rest of FY11 and the upcoming peak air travel months disappoint,” added OCBC. It was noted that Singapore Airlines added passenger capacity faster than air travel demand growth in August.

“This resulted in a fall in passenger load factor to 76.6%, below the recently released load factors of international flights worldwide and in Asia Pacific (from the IATA),” said OCBC. SIA’s regional subsidiary SilkAir is also adding capacity, albeit in a small way. The regional wing of Singapore Airlines said it is taking delivery of three Airbus 320 next year.

“SilkAir currently has 19 aircraft in her fleet. This is set to increase to 22 aircraft with the delivery of 3 new Airbus 320 aircraft in 2012,” Soraya Salim,

Simeon Cheong, CEO of SC Global

the company’s head of public affairs told Singapore Business Review.

SC’s Global ambitions SC Global’s CEO and chairman Simon Cheong has reason to smile these days despite the much reported slowdown in luxury property sales. The reason - its unsold properties were developed at a cost that is still well below the prevailing prices in the area, so that when it does sell more units, its profits are easily bookable.

As Kim Eng noted, SC Global has developed something of a reputation for constantly innovating to raise the bar on fine living and achieve record‐ breaking selling prices. “We believe the high replacement cost of $4,700 psf and a tightly‐ held supply will continue to support primary market prices in the luxury segment. The breakeven for 65% of SC Global’s unsold inventory stands at $1,600‐1,900 psf, lower than today’s cost of land in prime Orchard Road,” Kim Eng said.

The research firm added that the cost of land in Orchard Road can only go one way, up. By and large, luxury units are limited in supply.

“SC Global’s two largest projects, The Marq and Hilltops, make up 65% of its inventory. Their breakeven price of $1,600‐1,900 psf is less than today’s cost of land in the Orchard Road area and significantly below our estimated replacement cost of $4,700 psf. This, together with the ability to fetch a premium for its products, makes SC Global our top pick for the luxury segment,” said Kim Eng.

co-published Corporate profile

BMW’s EfficientDynamics “On the Run” BMW Asia races with Singapore Sports Council for a marathon event aiming to run faster and farther on less energy.

Lito German, Marketing Director, BMW Asia

There is a synergy between the core principles of running and BMW EfficientDynamics philosophy

B

MW Asia recently announced its cosponsorship of the upcoming Standard Chartered Marathon in Singapore.

BMW, along with the Singapore Sports Council, unveiled a series of initiatives aimed at further engaging participants and improving the experience for runners leading up to and during the race.

A highlight of the partnership is a chance for Full and Half Marathon runners to win a brand new BMW X1 by joining Team BMW. This will be complemented with a series of activities, including running clinics where runners will be given expert coaching ahead of the race in December 2011.

BMW will also be sponsoring the pacers programme for Full Marathon runners. And as the Official Car Sponsor, BMW cars will also be deployed to provide medical, logistics and operational support on race day.

BMW & Sports Marketing Sports marketing has enabled BMW to engage with customers during activities that form an integral part of their lifestyle. Sports has been used to communicate BMW’s competitive characteristic, which has long been

an integral part of their brand, in the form of motorsports as well as other kinds of sports.

“Our involvement in sports does not only come in the form of mere monetary sponsorship. We also apply our core competence in design and technology in the development of certain sport equipment to create the competitive edge for the team,” explains Mr. Lito German, Marketing Director, BMW Asia.

Running & BMW EfficientDynamics The BMW brand has long been associated with premier sports events worldwide and the co-sponsorship of the Standard Char-

“The philosophy of the EfficientDynamics technology comprises of a highly efficient engine through air and fuel management, minimized energy loss, lightweight design and superior aerodynamics.”

tered Marathon Singapore is a continuation of this.

In this case, BMW communicates a synergy between the core principles of running and BMW EfficientDynamics philosophy, as marathon runners and BMW have the same ultimate goal: To Run Faster and Farther on Less Energy. BMW’s goal is to increase the awareness and appreciation for BMW EfficientDynamics – the technology enables each and every BMW car with more efficient energy usage and less carbon emission, while simultaneously enhancing its performance.

Says Mr. German: “The philosophy of the EfficientDynamics technology comprises of a highly efficient engine through air and fuel management, minimized energy loss, lightweight design and superior aerodynamics. In our view, the same principle applies to that of competitive long-distance running which similarly aspires to run faster and farther with lesser energy.”

For more information on The Standard Chartered Marathon Singapore, please visit www.marathonsingapore.com BMW Asia Pte Ltd 1 HarbourFront Avenue #15-02/07 Keppel Bay Tower Singapore 098632 Tel: (+65) 6838 9600 Fax: (+65) 6838 9610 www.bmw-asia.com SINGAPORE BUSINESS REVIEW | OCTOBER 2011 19

opinion

Karin Clarke How to keep the top guys in your team

M

karin clarke Randstad’s Regional Director for Malaysia and Singapore

anaging a team of high performers requires an innovative and detailed HR and leadership approach involving an effective talent attraction and recruitment process, ongoing development plans, motivating rewards and recognition programs, and a proactive retention strategy.

According to respondents of Randstad’s World of Work Report, the main reasons for a planned job change were for better opportunities for growth and advancement (39%) and salary and remuneration (21%).

As the SingTel Singapore Grand Prix roars into town, Randstad illustrates how managers can take a leaf out of the Formula One book to manage a high performance team for their businesses.

Recognise, reward and challenge Just like a team leader on the racing track, business leaders need to encourage their teams by providing genuine, regular recognition of excellence. At the same time, in order to ensure a sustainable level of efficiency, it is important to make certain that high performers, with their unique levels of intensity, don’t tire of the ‘everyday grind’.

Build in new goals once existing goals are close to being achieved, provide new challenge and competition, and introduce tangible rewards for milestones.

Set the goal and let them achieve it High performers are often unique in that they have different and innovative methods of approaching tasks and goals than other employees. Rather than trying to manage this and reign it in, set a clear direction and goal for them, and then step away. Don’t micromanage — let them achieve.

Align business and individual goals High performers need to strive towards inspiring goals that are achievable but may be just out of reach — this presents the challenge that they need to work harder, faster and smarter. This group is characterised by the need to constantly try to better previous successes, interestingly also the hallmark of some of the most competitive people in the world, Formula One drivers. Put the company or task goals in place, and then allow your high performers to set their sights on their own personal benchmark, often enabling them to far surpass expectations.

Ensure you are on the circuit Just like reputations forged on a rain-drenched track, the credentials of a true leader shine through during periods of difficulty — a concept set in stone during the recent economic downturn.

20 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

High performers often feel the impact of periods such as downturn more acutely. Downturn for high achievers can transform quickly from a period of challenge into an insurmountable obstacle — something that seemingly can’t be cleared regardless of determination — and this can result in plummeting levels of morale, and in turn, enthusiasm and dedication from high performers. Critical in these times is a leader’s ability to identify this drop and continue to inspire and motivate their people so they continue to achieve beyond average downturn levels.

During these periods, the traditional leadership attributes of inspiration, motivation, creating vision and providing recognition come to the fore. Effective harnessing of these characteristics can mean the difference between maintaining your high performers through difficult periods, and boosting them back up quickly in upswing, or losing them completely.

In pole position The key for employers and leaders to remember when managing this vibrant and evolving group is to recognise the top individuals in your organisation, and tailor programs to inspire them. Understand what drives them, reward their efforts and allow their passion for success to flow throughout the organisation.

"Know the value of your employees”

opinion

Take a look at the current hiring trend Prof. Lynda Gratton, Professor of Management Practice, London Business School Deb Loveridge, Managing Director, Asia Pacific, Randstad

Lynda Gratton & Deb Loveridge

> Attracting new talents will be a challenge.

In Singapore and across the rest of Asia, a rapidly growing middle class has resulted in a booming demand for products and services that support an urban lifestyle.

Sectors as diverse as financial services, hospitality, construction, manufacturing, telecommunications and fast moving consumer goods are benefiting from this growing class of effluent consumers, despite an uncertain global outlook.

This year’s Randstad World of Work Report indicates that attracting new talent for the next phase of growth is the

biggest human capital challenge across the region.

Today, there are multiple forces at work that will fundamentally change our current perceptions of employees, work and organisations.

These five key forces are: rapid advances in technology, increasing globalisation, the needs of a low-carbon economy, profound changes in longevity and demography, and deep societal changes.

For example, the connectivity and virtual knowledge like that in Singapore today will mean the death of the classic hierarchy. In its place will emerge a more peer-to-peer way of working and an understanding that collective intelligence can play a profound role in the world.

Shaping consumer preferences and perpetuating the globalisation trends are

the emerging markets of China and India.

Since the Cultural Revolution in China and the liberalisation of markets in India, both countries have experienced massive growth – fueled by a joint domestic market of over two billion consumers, and the capacity to be the ‘back office’ and ‘factory’ of the world. With rising levels of education in these two nations, China and India are also becoming key to the talent pool of the world, especially in the fields of engineering and science.

Despite the differences between them, all nations have common challenges – the need to attract and retain talent, boost productivity and develop talented leaders. Whether organisations are based in the region, whether they are large or small, one message is very clear – it’s time to lead.

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property

krisana gallezo

PROPERTY DEVT & INVT

Figure 10: Median rents

Figure 11: SIBO

Median rents

(%) 3.4

4.0

Rent (S$ psf pm)

2.9 2.4

3.0

1.9 1.4

2.0

0.9

CCR SOURCES: CIMB, URA

RCR

2002Q1

2001Q3

2001Q1

2000Q3

0.4 2000Q1

1.0

OCR

SOURCES: CIMB, URA

CBD, mainly in engineering and pharmaceutical related industries such as in Tuas and Woodlands areas.Figure “Additionally, some 12: SIBOR vs.junior PPI expatriates on local terms may (3mth SIBOR %I) find such properties to be worth leasing as it is within their budget and a heartland 8 staying experience is close to their humble lifestyle at home, as well as offering a reflective, down-to-earth Singapore6living experience,” he added.

Median rents in Singapore private residential homes

Figure 13: Affor

(PPI) 200 180

50% 42% 41% 40%37%

160

M a D r-94 ec Se -94 p J u -95 n M -9 6 a D r-97 ec Se -97 p J u -98 n M -9 9 ar D -00 ec Se -00 p J u -01 n M -0 2 ar D -03 ec Se -03 p J u -04 n M -0 5 a D r-06 e Se c -0 p 6 J u -07 n M -0 8 a D r-09 e Se c -09 p J u -10 n11

Demand 4for executive condo on the rise The hottest property in September was the Arc 140 at Tampines, according to ECG senior district 2 director Eric Tng. “Arc is a resort-themed project 120 with activities for all ages. It is in the condo belt in Tampines0and has easy access to major expressways.

100 The new MRT will be about 1 km away when opened in 2018,” he added. Of significance is that Arc was the first executive condominium to go on sale under the new rules allowing for higher income to 3mth SIBOR (LHS) earners PPI (RHS) buy HDB properties. “There is still a lot of demand SOURCES: CIMB, URA, BLOOMBERG from Singaporeans who want to own a condo.

With condo prices almost out of reach for young “With condo prices almost out of reach for Singaporeans, EC is the next best alternative in owning a condo,” noted Mr. Tng. Figure 14: HDB resale index young Singaporeans, EC is the next best However, prospects for the property market alternative in owning a condo.” remain dim. Brokerage firm CIMB reckons 200 residential prices will fall by 12-18%, from S$2,900psf to S$2,550psf for the luxury-end and Many far-flung properties were purchased for S$1,000psf to S$850psf for the mass market. owner’s occupation, catering to the HDB upgraders’ a 18%-25% reduction from current market, instead of investment. However, the buyer of “This implies 140 transacted levels and closer to values seen in 2009. far-flung properties, according to Mr. Ong, can still With the expected slowdown in the global economy find some investment value by tapping on a niche next year, we believe volumes for more affordable tenant demand base – i.e. on foreigner professionals 80 mass market units will hold,“ it noted. who work near the far flung areas instead of at the 22 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

30%

1

20%

10%

19 95 19 96 19 97 19 98

Figure 15: HDB 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Q07

0 20

Q07

O

ne of the amazing facts of Singapore’s property market is that in September, a whopping 90% of new sales were happening in the ‘outside central region’ market. With demand for central properties in the dump, this is now an upgraders market.

Projects that blew the gates off were A Treasure Trove and Arc at Tampines which managed to sell 683 of 882 units and 233 of 574 units, respectively.

Slow sales were reported at D’Leedon, Marina Bay Suites Reflections and the Residences at W. In today’s property market, the further out a property is, the more buyers are interested. Our spot checks with real estate agents found that properties at the extreme ends of Singapore were the hottest, with some setting new records. Areas classified as ‘far-flung’ include those in western tip of Singapore (Jurong East and Jurong West), the northern part like Woodlands, Sembawang and Yishun, and the eastern tip.

According to Cushman & Wakefield senior manager for research in Asia Pacific Ong Kah Seng, far-flung properties are popular despite their off-thebeaten locations due to the satire interest for many people to simply own a piece of private residential property which became very evident especially in 2010 and 1H 2011, before the impact of US and Europe economic conditions took its toll. Buyers of far-flung properties, he said, may include many who have already been staying in HDB flats in the vicinity and have their families and generations in the neighborhood. Mr. Ong noted that there are some who may feel that far-flung properties are value buys as they may be priced cheaper than better located properties. “With plans to improve connectivity to the rest of the island, the home buying interest for such properties have been encouraging.

Additionally, there are projects which appeal as they offer SOHO units with high ceilings, which can be used for small home businesses,” he said.

krisana gallezo Senior Reporter krisana@charltonmediamail.com

20 2004 Q 0 1 20 4 Q 0 2 20 4 Q 04 3 20 Q 0 20 5 Q4 0 1 20 5 Q 0 2 20 5 Q 0 20 5 Q3 0 20 6 Q4 0 1 20 6 Q 2 2006 Q 0 20 6 Q3 0 4 20 7 Q 0 1 20 7 Q 0 20 7 Q2 0 20 7 Q3 08 4 20 Q 0 1 20 8 Q 0 20 8 Q2 0 3 20 8 Q 4 2009 Q 0 20 9 Q1 2009 Q2 0 3 20 9 Q 1 4 20 0 Q 1 20 0 Q1 1 20 0 Q2 1 3 20 0 Q 1 4 20 1 Q 11 1 Q 2

Residential property: Going to extremes

October 18, 2011

co-published coRporate profile

Guilty as Charged

ECO Campaign

“Asia’s online market has reached a size and scale at which companies can achieve significant results by engaging and interacting with audiences online” The team: Francis Choo, Tobias Wilson and Ed Choa Accomplice making waves with integrated marketing ccomplice (www.accomplice.com.sg), Asia’s leading integrated engagement agency, has been making waves in the integrated marketing scene, harnessing the latest technologies and techniques to help leading brands in Asia engage with their customers.

According to Tobias Wilson, co-founder and managing director of accomplice, interactive marketing has blossomed in Asia over the last two to three years: “Interactive in Asia is exploding and has been for the past two to three years in conjunction with things like internet penetration, faster mobile connections and more talent being developed or imported into the region. The sheer size of Asia alone is enough to set it miles apart from the rest of the world, not to mention its insatiable appetite for new, hip and cutting edge content.”

A

Interactive marketing still evolving Over the last year, tremendous shifts have taken place that have impacted how marketing campaigns are delivered, how companies interact with their audiences, and how results

You’re Under Arrest campaign are measured. Social remains a major phenomenon, with 284 million unique visitors in January 2011, 115 million of whom were on Facebook, and four of the world’s top ten Twitter usage countries are in Asia (ADMA, 2011).

Companies realize the right digital and social media campaign can now actively influence and enable purchases.

“Asia’s online market has reached a size and scale at which companies can achieve significant results by engaging and interacting with audiences online, there are so many mediums out there now, so many opportunities to gain positive touch points on your customers and in

the same breath, so many ways to do it wrong.

We make sure that all of our clients’ bases are covered, from a simple mobile banner, to a 12 field data-capture site that’s integrated with 6 external sites, to engaging a blogger, to Facebook, right through to TVCs,” says Ed Choa, digital director at accomplice.

Even with the multitude of developments in the interactive marketing scene, there are more changes to come.

Tobias explains:“The interactive marketing scene has changed massively and continues to do so by the day, maybe even by the hour!

Creatively, HTML 5 has been a big development, allowing flash, video and audio content to run on Facebook and iDevices. This opens up a huge range of execution possibilities for clients and also broadens the market by including the millions of Apple users in Asia previously neglected by flash campaigns.” accomplice is a leading integrated engagement agency, servicing brands such as Panasonic Asia, Toyota, Lexus, Standard Chartered, and Avaya.

CONTACT accomplice pte ltd 64 Syed Alwi Road 02-01 Singapore 207643 Tel: +65 6294 1007 Fax: +65 6296 4955 www.accomplice.com.sg

w

What’s cooking with rice?

Prices are rising at the wrong time for Asia reports HSBC’s analysts Frederic Neumann and Tushar Arora.

A

fter staying remarkably subdued earlier this year, rice prices have started to drift up again, partly due to a new Thai policy.

If sustained, the rise in the cost of rice could stem any downdraft in headline inflation across the region, especially ASEAN. A rerun of the 2008 rice price scare looks unlikely, but sticky food prices, along with core, tie the hands of central bankers.

Not again…

Inflation jitters have reverberated across emerging markets this year.

Curiously, however, most ASEAN economies, with the notable exception of Vietnam, have seen remarkably tame headline prints unlike the vicious pinch that China, India and Korea have endured. The reason is simple: rice prices have barely budged.

This stands in marked contrast to 2008 when the cost of food exploded in the region, with rice being the primary culprit. Of course, economies such as Indonesia, Thailand, the Philippines and China have seen inflation rise as well this year, but price pres24 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

“While the aggregate IMF food index has dropped 2.2% between March and August, the rice price index has recorded a rise of 7.3% over the same period.”

sures have generally occurred more at the core level, without the sharp spike in headline readings.

But, things may be changing: the cost of rice is suddenly beginning to drift up. This, in part, reflects deliberate policy steps as the new government in Thailand, the region’s main exporter, announced it would jack up the minimum reserve price it pays to farmers. In itself, this is not enough to drive a full-blown spike in ASEAN headline inflation. In other countries, such as the Philippines, harvests have been relatively good this season. Still, it’s important to heed a lesson from 2008: back then, supply also remained relatively stable, but an initially gradual rise in prices was quickly exacerbated by national policy responses.

A number of governments imposed export restrictions to suppress local price pressures, in turn sparking frantic buying by importing countries and consumers. The price of rice more than tripled in a few short months.

We expect more measured government responses this time, preventing a repeat of what happened in 2008.

However, the risk of more material upward pressure in food prices remains. This, in fact, is a broader regional phenomenon: in China and India recent indicators suggest that agricultural prices are not easing as quickly as expected and have in some instances even started to rise in recent weeks. All this fits into our broader theme discussed in Pretty sticky: What chance of easing in Asia?

(20 September) – inflation will likely prove quite sticky across Asia in the coming months, preventing central banks from easing monetary policy aggressively. Core inflation is mostly to blame, but watch out for perky rice prices, too.

Did you notice it?

All the worries about another recession in the West notwithstanding, there is one commodity which has just touched a 30-month high, with a strong rally still underway. While the aggregate IMF food index has dropped 2.2% between March and August, the rice price index has recorded a rise of 7.3% over the same

analysis

void left by Thailand, began to restrict “The den of higher rice prices. According its own shipmentsMacro despite ample local government to our estimates, every 10% increase abc Asian Economics Macro (Thailand) will supply. This was 21a September deliberate in the retail price of abc rice will add 2011 move to Asian Economics 21 September 2011 bring down local food prices. With pay THB15,000/ 0.25ppt to headline inflation, squeezinflation again well above 20%, and mt for unmilled ing disposable incomes in the cities showing few signs of abating, there white rice and and more generally for the non-farm is a risk that the Vietnamese govern- THB20,000/mt population. In addition, you have the ment may again restrict shipments to for fragrant second-order impact through higher rice.” contain local prices. inflation expectations and, associDid you notice it? ated with that, rising wage demands Did you notice it?

All the worries about another recession in the West notwithstanding, there is one commodity which has WhatAll does it mean for Thailand? to compensate.

Finally, price control the worries another recession in the notwithstanding, there is one commodity whichIMF has food index has justabout touched a 30-month high, withWest a strong rally still under way.

While the aggregate For Thailand, particular, the shortand/or subsidy schemes are ultimately just touchedin a 30-month high, with a strong rally still under way.

While the aggregate IMF food index has 2.2% between March and August, the rice price index has recorded a rise of 7.3% over the same term impact ofdropped this policy will pos- the rice price index has recordeddistortive, whichthemeans that they lead dropped 2.2% between March andbe August, 7.3% period.

Compare this with a 0.7% decline in the average oil indexa rise and aof4% fallover in wheatsame prices. Clearly, itive for farmers, but it will hurt other to less-than-optimal resource allocaperiod. Compare this with a 0.7% in the average oil index a 4% hugely fall in wheat prices.

Clearly, and the something is going ondecline here. Moreover, the price of riceand matters for Asian consumers parts something ofMacro the economy and it could in tion in the economy and, in turn, hurt isregion’s going oncentral here. Moreover, the price of rice matters hugely for Asian consumers and the Macro bankers, with rice commanding a big chunk of local CPI baskets and its price arguably of abc abc Asian Economics Asian Economics the long-run impair the country’s long-term growth. region’s central bankers, withrespect rice commanding a bigconsumers’ chunk of local CPI baskets and itsVeteran price arguably of importance with to conditioning inflation expectations.

Asia watchers know 21 September 212011 September 2011 conditioning consumers’ inflation expectations. Veteran watchers know statusimportance of beingwith therespect world’s largest rice Of Asia course, the pass-through of better than totoshrug off such a move. better than to shrug off such a move. exporter. higher rice procurement prices on Muchfarmers of this is due tobenefit the new Thai government led by Prime Minister Yingluck Shinawatra.

Fulfilling Obviously, Thai will consumer prices critically depends on Much of thisthe is due to theshe new Thaiduring government led bycampaign, Prime Minister Shinawatra. promise made her election a new Yingluck grain-buying plan wasFulfilling recently announced and the most from she themade scheme.

Aselection pricescampaign, a new grain-buying plan thewasscope and designand of the subsidy rethe promise during her recently announced is due to kick off on 7 October. The government will pay THB15,000/mt for unmilled white rice and rise, farm incomes increase and gime.

Even ifrice theandgovernment avoids is due to kick off onwill 7 October.

The government willguaranteed pay THB15,000/mt unmilled THB20,000/mt for fragrant rice. As the price is asfor much as 40%white above current market rates, the new scheme will thereby provide a any pass-through whatsoever, the THB20,000/mt forisfragrant rice.hoarding As the guaranteed priceand is asconsumers much as 40% above rates,to there widespread among traders as the pricecurrent of rice market is expected nearly stepping into stepping the void into left the by void Thailand, left by Thailand, began to restrict began to its restrict own shipments its own shipments despite ample despite local ample supply. local powerful to the rural economy soaring subsidy costs ofsupply. the scheme there boost is widespread hoarding among traders and consumers as the price of rice is expected to nearly double once this policy is implemented.

This was a This deliberate was a deliberate move to bring move down to bring local down food local prices. food With prices. inflation With again inflation well again above well 20%, above and 20%, (chartdouble 4). All sounds good, but could ultimately fall backandon taxoncethis this policy is implemented. few showing signs few of abating, signs of there abating, is a risk there that is athe risk Vietnamese that the Vietnamese government again may restrict again restrict But that’s not theeconomy? only worry currently overshadowing markets.payers, Itgovernment ismay estimated thatoverwhelmingly, around 1.56m tons of reside what showing about the overall Thai who, But that’sshipments not theproduction only worry currently overshadowing markets.

It is estimated that around tons of areas of will be lost in Japan because of radiation in Fukushima and the1.56m neighbouring torice contain to local contain prices. local prices.

Here shipments the impact is likely to be more in the cities.

Moreover, an increase in rice production will be lost inand Japan because of radiation in Fukushima the neighbouring areas to of purchase more Ibaraki, Miyagi Iwate.

This implies that Japan may stepand into international markets mixed. subsidies would still add to domestic What does What it does mean it mean for Thailand? for Thailand?

Ibaraki, Miyagi Iwate.

This impliesgenerally that Japanprefer may step into international markets to purchase moreof imports into rice,and though Japanese the locally grown variety.

Overall, the amount Firstly, there is a even clear risk that Thaidemand by of loosening the fiscal stance, rice, even though Japanese generally prefer the locally grown variety.

Overall, the amount imports into For Thailand, ForJapan Thailand, in particular, in particular, thetoo short-term impactproduction of impact this policy of this willpolicy be positive will befor positive fortons but farmers, itmentioned will but itabove will may not be largethe byshort-term world standards (the shortfall offarmers, 1.56m land will price itself outlarge of the internawhich would add to underlying inflaJapan mayhurt not be world standards (theimpair shortfall of 1.56m mentioned above amounts toeconomy only 0.34% ofitproduction world production). in a finely balanced market, with hurt other parts other of too the parts ofbythe and economy could and initthe could long-run in Still, the long-run theimpair country’s thetons status country’s of and being status the ofmany being the tionalamounts marketto with such a move.

Ultition pressures in the economy.

Aconly 0.34% ofinworld production).

Still, a finely market,ofand with manysupply, Japanese governments theexporter. region counting on in reliable andbalanced cheap sources international world’s largest world’s ricelargest exporter. rice mately, other exporters – Cambodia, cording to one estimate, cited by the governments in the region counting on reliable and cheap sources of international supply, Japanese demand could still have an impact. What’s more, Japan may need to keep purchasing rice internationally Obviously, Obviously, Thai farmers Thai will farmers benefit will thebenefit most from the most themay scheme. from theAs scheme. pricespurchasing rise, As prices farmrice rise, incomes farm will incomes increase willfor increase Pakistan, India and especially Vietpresident of the Bank Agriculdemand could still have an impact.

What’s more, Japan need to keep internationally for years to come if the affected regions cannot be properly decontaminated – be it physically, or in the the seek new and scheme thebenefit new will scheme thereby will provide thereby a provide powerful a boost powerful to the boost ruraltoeconomy the economy 4).

All (chart sounds All this sounds nam –and will to from higher ture and Agricultural Cooperatives for years to come ifofthe affected regions cannot be properly decontaminated –rural be it(chart physically, orthis in 4). the minds consumers. good, good, what better about but what thequality overall about the Thai economy?

Thai economy?

Here the impact Here the is likely impact toisbelikely moretomixed. be mixed. mindsbut ofand consumers. production inoverall the (BAAC), themorerice-pledging scheme If Thai rice becomes dearer, this may of course open the door towill othercost exporters, such as Vietnam, which long Firstly, run.

Secondly, Thailand’s urban “THB400bn for the 2011-12 Firstly, is a jump clear there risk is a the that clear Thailand risk The thatcourse will Thailand price will itself price out itself the out international oflargest the international market with market such with a move. a move.

If Thai there rice becomes dearer, this may of open theall, door to other exporters, such as Vietnam, which may into niche. country, after is of the second exporter in Asia, even if such product population will have to bear the burcrop, ”–Vietnam which toitsbenefit around 4% of Ultimately, Ultimately, other other –exporters Cambodia, –after Cambodia, Pakistan, India Pakistan, andlargest especially India and especially Vietnam will seek –its to will benefit seek to may jump into theexporters niche.

The country, all, is the second exporter in Asia, even ifamounts product is thought to be of slightly lower quality. However, one key lesson of 2008 was that Vietnam, far from from higher from production andlower betterquality. and quality better in quality the long inrun. the long run.

Thailand’s Thailand’s urban population urban population will will is thought toproduction behigher of slightly However, one keySecondly, lesson of Secondly, 2008 was that Vietnam, far from have to bear have thetoburden bear the of burden higher rice of higher prices.rice According prices. According to our estimates to our every estimates 10%every increase 10%inincrease the retail in the retail 2: …can in the Chart 1: of Change for the Chart 1:policy Change policy for thelargest largest rice rice exporter…

Chart 2:incomes …canaffect affect food inflation in thecities region and price rice price will ofin add rice 0.25ppt willinadd to0.25ppt headline toinflation, headline squeezing inflation,Chart squeezing disposable disposable inincomes thefood cities ininflation and the more moreregion Chart 1: Change in policy for the largest rice exporter…

Chart 2: …can affect food inflation in the region exporter… generally for generally the non-farm for the population. non-farm population.

In addition, In you addition, have the you second-order have the second-order impact through impact higher through higher 9000 20 ASEANprice , Finally, w eighted &price y -o-y 9000 20 rising inflation expectations inflation and, associated and, associated with that, with risingthat, wage demands wage to demands compensate. to compensate.

Finally, 7500 expectations ASEAN , w eighted & y -o-y 15 thatmeans 7500 and/or control control subsidy and/or schemes subsidy are schemes ultimately are ultimately distortive, distortive, which means which they lead that to they less-than-optimal lead to less-than-optimal 6000 15 6000 resource allocation resource in the economy in the and, economy in turn, and, hurt in long-term turn, hurt long-term growth. growth.

4500 allocation 4500

2010: 000s metric tons

3000

10

10

Chart 3: Thai rice prices rising already before Chart 3: ThaiChart rice prices 3: Thairising rice prices alreadyrising before already new policy before new policy new policy

Brazil

Egypt

Argentina

China Brazil

Uruguay Argentina

ChinaIndia

Cambodia Egypt

Pakistan Uruguay

Thailand India

Vietnam Cambodia

Vietnam

Pakistan

2010: 000s metric Of3000 course,Of thecourse, pass-through the pass-through of higher rice oftons higher procurement rice procurement prices on consumer prices on consumer prices critically prices depends criticallyon depends on 5 1500 the scope and the scope designand of the design subsidy of theregime. subsidyEven regime. if theEven government avoids anyavoids pass-through any pass-through whatsoever, whatsoever, 5 if the government 1500 0 0 tax-payers, the soaring the subsidy soaringcosts subsidy of the costs scheme of thecould scheme ultimately could ultimately fall back on fall back on tax-payers, who, overwhelmingly, who, overwhelmingly, 0 0 reside in the reside cities. in the Moreover, cities. Moreover, an increaseaninincrease subsidies in would subsidies stillwould addJul-07 tostill domestic add toNov demand domestic bydemand loosening Mar-08 -08 Jul-09 Mar-10 by Novloosening -10 Jul-11 Mar-08in Nov Jul-09 Mar-10 Nov -10 the fiscal stance, the fiscal which stance, would which addwould to underlying add to underlying inflation Jul-07 pressures inflation pressures the-08economy. in theFood economy.

According According toJul-11 one to one Headline Food HeadlineCooperatives estimate, cited estimate, by the cited president by the of president the Bank of for theAgriculture Bank for Agriculture and Agricultural and Agricultural Cooperatives (BAAC), the (BAAC), the Source: USDA, HSBC Source: CEIC, HSBC Source: USDA,rice-pledging HSBCscheme will HSBCwhich rice-pledging scheme cost “THB400bn will cost “THB400bn for the 2011-12 forSource: theCEIC, crop,” 2011-12 crop,” amounts whichtoamounts around to 4%around of 2010 4% of 2010 Source: USDA, HSBC Source: CEIC, HSBC GDP. This, GDP. of course, This, of may course, be onmay the high-side be on the of high-side cost estimates. of cost estimates.

Still, evenStill, if theeven programme if the programme were to cost were to cost 2 only half of only this, half it risks of this, diverting it risks government diverting government funds fromfunds otherfrom important other important areas. areas.

2 Thailand

period. Compare this with a 0.7% decline in the average oil index and a 4% fall in wheat prices. Clearly, something is going on here. Moreover, the price of rice matters hugely for Asian consumers and the region’s central bankers, with rice commanding a big chunk of local CPI baskets and its price arguably of importance with respect to conditioning consumers’ inflation expectations. Veteran Asia watchers know better than to shrug off such a move.

Much of this is due to the new Thai government led by Prime Minister Yingluck Shinawatra. Fulfilling the promise she made during her election campaign, a new grain-buying plan was recently announced and is due to kick off on 7 October. The government will pay THB15,000/mt for unmilled white rice and THB20,000/ mt for fragrant rice. As the guaranteed price is as much as 40% above current market rates, there is widespread hoarding among traders and consumers as the price of rice is expected to nearly double once this policy is implemented.

But that’s not the only worry currently overshadowing markets. It is estimated that around 1.56m tons of rice production will be lost in Japan because of radiation in Fukushima and the neighbouring areas of Ibaraki, Miyagi and Iwate. This implies that Japan may step into international markets to purchase more rice, even though Japanese generally prefer the locally grown variety. Overall, the amount of imports into Japan may not be too large by world production standards (the shortfall of 1.56m tons mentioned above amounts to only 0.34% of world production). Still, in a finely balanced market, and with many governments in the region counting on reliable and cheap sources of international supply, Japanese demand could still have an impact. What’s more, Japan may need to keep purchasing rice internationally for years to come if the affected regions cannot be properly decontaminated – be it physically, or in the minds of consumers.

If Thai rice becomes dearer, this may of course open the door to other exporters, such as Vietnam, which may jump into the niche. The country, after all, is the second largest exporter in Asia, even if its product is thought to be of slightly lower quality. However, one key lesson of 2008 was that Vietnam, far from stepping into the

Chart 4: To benefit the Thai economy in

Chart 4: To benefit Chart 4: theToThai benefit economy the Thai in short-run economy in short-run short-run

1000

1000

60

800

800

40

600

600

400

400

200

200

0

0

Sep-99

Sep-02 Sep-99

60 % y -o-y , 3mma % y -o-y , 3mma 40

20

20

0

0

-20

-20

White Rice 100 White % Grade Rice 100 B, USD/ton % Grade B, USD/ton-40

-40

Source: Source: CEIC,CEIC, HSBC HSBC Source: CEIC, HSBC

Jul-05 Sep-05 Sep-02

Sep-08 Sep-05

Sep-11 Sep-08

Sep-11

10

10

5

5

0

0

-5

-5

-10

-10

Jul-05 Jul-07 Jul-07 Jul-09 Jul-09 Jul-11 Jul-11 Farm IncomesFarm (LHS) Incomes (LHS) Priv ate Consumption Priv ate Consumption Index (RHS) Index (RHS)

Source: CEIC, Source: CEIC, HSBC Source: HSBC CEIC, HSBC

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 25

3

analysis 2010 GDP. This, of course, may be on the high-side of cost estimates. Still, even if the programme were to cost only half of this, it risks diverting government funds from other important areas.

Here’s the bottom line on the new policy: since farm income is an important driver of private consumption in the economy, expect a positive impact on growth in the short-run. Of course, this will come at the cost of higher food and more generalized inflation, and this in turn would keep the Bank of Thailand in a hawkish mood even in the face of weakening export demand. In the long run, the regional share of rice exports from Thailand is expected to fall, as other exporters like Cambodia and Vietnam gain a competitive edge and snatch export market share.

What does it mean for other countries?

Let’s try to filter out which country in Asia is most vulnerable to a rise in Thai rice prices. In chart 5, we show the relative local balance between the supply and demand for rice. Clearly, India, China, Pakistan and Vietnam are self-sufficient in terms of rice production and should be relatively more immune to a price shock from Thailand (although, to the extent that their exporters can fetch a higher price internationally, the local cost of rice is bound to climb as well). Japan and Korea only have small import requirements, so they seem in relatively robust shape as well, although that could change for Japan as we discussed. It is countries like the Philippines, Malaysia and Indonesia, which rely on imported rice to keep them going, that would suffer most.

In charts 6 and 7 we made some back-of-the-envelope calculations on how an increase in Thai rice prices would impact inflation in these markets. Perhaps not too surprisingly, the Philippines stands out followed by Malaysia and Indonesia. The impact of rising Thai rice prices on inflation depends on two factors: Firstly, the pass-through coefficients, i.e. how strongly domestic rice prices respond to changes in Thai rice prices. In this regard, Indonesia is the least correlated while the Philippines, Singapore and Malaysia are highly correlated.

Secondly, the pass-through depends on weight of rice in the domestic consumption baskets and these range

Chart 5: IN, TH, VN, CH and PK are self-sufficient in rice Chart 5: IN, TH, VN, CH and PK are self-sufficient in rice

9 6 3 0 -3

9

Dom es tic supply minus Dom es tic demand, m t Dom es tic supply minus Dom es tic demand, m t

Chart 6: High weight of rice in PH, ID and MA Chart 6: High weight of rice in PH, ID and MA 10

% in dom estic cons um er bask et % in dom estic cons um er bask et

10 8 8

6

6 6 4

3

4 2

0

2

-3

0

0

IN

IN

PH PH

PK T H VN ID PH CH JN KR WD PK T H VN ID PH CH JN KR WD

Source: USDA, HSBC. * WD refers to total World Source: USDA, HSBC. * WD refers to total World

ID ID

MA MA

SG SG

KR KR

TW TW

Source: CEIC, HSBC. *Indonesia weight is Cereal, Cassava and related products Source: CEIC, HSBC. *Indonesia weight is Cereal, Cassava and related products

Here’s the bottom line on the new policy: since farm income is an important driver of private Here’s the bottom line on the new policy: since farm income is an important driver of private consumption in the economy, expect a positive impact on growth in the short-run. Of course, this will Macro consumption in the economy, expect a positive impact on growth in the short-run. Of course, this will Macro Asian Economics come at the cost of higher food and more generalized inflation, and this in turn would keep the Bank of Asian 21 September 2011 come at Economics the cost of higher food and more generalized inflation, and this in turn would keep the Bank of 21 September Thailand in a2011 hawkish mood even in the face of weakening export demand. In the long run, the regional Thailand in a hawkish mood even in the face of weakening export demand. In the long run, the regional share of rice exports from Thailand is expected to fall, as other exporters like Cambodia and Vietnam share of rice exports from Thailand is expected to fall, as other exporters like Cambodia and Vietnam gain a competitive edge and snatch export market share. gain a competitive edge and snatch export market share.

ab abc

Whatdoes doesit itmean meanfor forother othercountries? countries?

What

Let’s try to filter out which country in Asia is most vulnerable to a rise in Thai rice prices. In chart 5, we

Chart TH, VN, CH and PK are Chart to 6:aHigh weight of rice inIn PH, ID 5, and Let’s 5: tryIN, to filter out which country in Asia is most vulnerable rise in Thai rice prices. chart weMA show local between in the for rice.

India, China, Chartthe 5: IN,relative TH,in VN, CH and balance PK are self-sufficient ricesupply and demand Chart 6: High weightClearly, of rice in PH, ID and MA Pakistan self-sufficient rice show local balance betweeninthe for weight rice. Clearly, India, Pakistan Chart the 5: IN,relative TH, VN, CH and PK are self-sufficient ricesupply and demand Chart 6: High of rice in PH, ID andChina, MA and Vietnam are self sufficient in terms of rice production10and should be relatively more immune to a Dom es tic supply minus Dom es tic demand, m t and Vietnam are self sufficient in terms of rice production relatively more immune to a in dom estic cons um er bask et 10 and should%be Dom es tic supply minus Dom es tic demand, m t 9 shock from Thailand (although, to the extent that their price a erhigher % in domcan esticfetch cons um bask et price 8 exporters 9 price shock from Thailand (although, to the extent that their 8 exporters can fetch a higher price internationally the local cost of rice is bound to climb as well).

Japan and Korea only have small import 6 6 internationally the local cost of rice is bound to climb as well).

Japan and Korea only have small import 6 requirements, so they seem in relatively robust shape as6 well, although that could change for Japan as we 3 requirements, so they seem in relatively robust shape as well,4 although that could change for Japan as we 3discussed. It is countries like the Philippines, Malaysia 4and Indonesia, which rely on imported rice to 2 discussed.

It is countries like the Philippines, Malaysia and Indonesia, which rely on imported rice to 0 2 0keep them going, that would suffer most.

0 keep them going, that would suffer most.

0 -3 PH ID MA SG KR TW -3In charts 6 and 7 we made some back-of-the-envelope calculations on an increase rice PH ID how MA SG in Thai KR T Wprices IN PK T H VN ID PH CH JN KR WD In charts 6 and 7 we made some back-of-the-envelope calculations on how an increase in Thai rice prices IN PK T H VN ID PH CH JN KR WD would impact inflation in these markets. Perhaps not too surprisingly, the Philippines stands out followed would impact inflation these the Philippines stands outrelated followed Source: USDA, HSBC. * WD refers in to total World markets. Perhaps not too surprisingly, Source: CEIC, HSBC. *Indonesia weight is Cereal, Cassava and products Source: refers to total CEIC, HSBC. *Indonesia is Cereal, Cassava and related Source: USDA,HSBC. HSBC. **WD WD refers to total World World Source: CEIC, HSBC. weight isweight Cereal, Cassava and two related products byUSDA, Malaysia and Indonesia.

The impact of rising ThaiSource: rice prices on*Indonesia inflation depends on factors: products

by Malaysia and Indonesia. The impact of rising Thai rice prices on inflation depends on two factors: Firstly, the pass-through coefficients, i.e. how strongly domestic rice prices respond to changes in Thai Firstly, thethe pass-through i.e. howsince strongly prices respond Here’s bottom linecoefficients, on the new policy: farmdomestic income isrice an important drivertoofchanges privatein Thai Here’s the bottom line on the new policy: since farm income is an important driver of private Chart 7: Impactinofthe a 10% increase 8: Rice buffer stocks: In better consumption economy, expectinabenchpositive impactChart on growth in the short-run.

Of course, thisshape will consumption in the economy, expect a positive impact on growth in thebuffer short-run.

Of course, this will Chart 7: prices Impact of a of 10%higher increasefood in benchmark ricegeneralized prices Chart 8: Rice stocks: Inwould better shape today mark riceat today come the cost and more inflation, and this in turn keep the Bank of Chartat 7: Impact of aof 10% increase in benchmark ricegeneralized prices Chart 8:and Rice this bufferinstocks: better keep shape today come the cost higher food and more inflation, turn In would the Bank of 0.50 Thailand in a hawkish mood even in the face of weakening export demand.

In the long run, the regional ppt increase in headline 0.50 Thailand in a hawkish mood even in the inflation face of weakening 40 export demand. In the long run, the regional ppt increase in headline inflation 0.40 of rice exports share from Thailand is expected to fall,40as other exporters like Cambodia and Vietnam 0.40 share of rice exports from Thailand is expected to fall, as other M illionCambodia M etric Tons and Vietnam 30 exporters like gain 0.30 a competitive edge and snatch export market share.

M illion M etric Tons 30 gain 0.30a competitive edge and snatch export market share.

20

0.20 20 What doesit mean it meanforforother othercountries? countries?

0.20 What does 10 0.10

10 0.10 Let’s try to filter out which country in Asia is most vulnerable to a rise in Thai rice prices. In chart 5, we 0.00 0 to a rise in Thai rice prices. In chart 5, we Let’s try to filter out which country in Asia is most vulnerable 0.00 show the Philippines relative local balance the supply and 0demand forTH rice.VNClearly, India, China, Pakistan Malay s ia between Indonesia IN rice.

IDIndia, PH China, CH JN KR M EC show the relative the supply and demandINfor Clearly, Pakistan Philippineslocal balance Malay s iabetweenIndonesia TH VN ID PH CH JN KR M EC and Vietnam are self sufficient in terms of rice production and should be Jun-08 relatively more immune to a Aug-11 and Vietnam are self sufficient in terms of rice production and should be relatively more immune to a Jun-08 Aug-11 price shock from Thailand (although, to the extent that their exporters can fetch a higher price Source: Jones Lang LaSalle, CEIC Source: CEIC, HSBC Source: USDA,HSBC. HSBC. *MEC MEC refers to major exportingexporting countries countries Source: USDA, refers major price shock from Thailand (although, to the extent that their exporters can fetch a to higher price Source: CEIC, HSBC Source: USDA, HSBC. MEC refers to major exporting countries internationally the local cost of rice is bound to climb as well). Japan and Korea only have small import internationally the local cost of rice is bound to climb as well). Japan and Korea only have small import “It is shape countries months. this not as likely from requirements, as low as so0.3-1.7% Hong robust they seemin in relatively as well, although that However, could change for is Japan we to requirements, so they seem in relatively robust shape as well, although that could change for Japan as we 4 likeMalaysia the Philipbe repeated this around.

For one, Kong, Taiwan,ItKorea and like Singapore 4 discussed. is countries the Philippines, and Indonesia, which rely ontime imported rice to discussed. It is countries like the Philippines,pines, Malaysia and Indonesia, which rely on imported rice to Malaysia the current buffer stock level for mato more in the keepthan them9% going, thatPhilippines. would suffer most. keepshould them going, woulda suffer jor exporting countries is 84% higher So, we that expect rerunmost. of and Indonesia,

Inwith charts and 7 we made some on how an increase pricesalso on than in 2008 (chartin8).Thai Werice should 2008, a 6significant spike in back-of-the-envelope rice which rely calculations In charts 6 and 7 we made some back-of-the-envelope calculations on how an increase in Thai rice prices impact inflation in these markets. Perhaps not too the Philippines standsmeasured out followed imported ricesurprisingly, to (hopefully) see more govprices,would exacerbated by policy responswould impact inflation in these markets. Perhaps not too surprisingly, the Philippines stands out followed ernment this in light of es? We don’t think at leastThe not to ofkeep

by Malaysia and so, Indonesia. impact risingthem Thai rice prices on inflationreactions depends on twotime factors: Malaysia and Indonesia. The impact of rising Thai rice prices on inflation depends on two factors: that domestic rice the prices lessons learned from the uncoorthebysame Yes, thecoefficients, situation i.e. going, Firstly,extent. the pass-through how strongly respond to changes in Thai Firstly, coefficients, i.e. how strongly domestic ricedinated prices respond changes inin Thai would suffer policytoresponses 2008. seems to the be pass-through similar as the Thai govEven so, the risk of more material ernment back then also paid above most.”

Chart 7: Impact of a 10% increase in benchmark rice prices Chart 8: Rice buffer stocks: In better shape today upward ontoday food prices remarket incomes, withrice prices Chartprices 7: Impact to of aboost 10% increase in benchmark Chart 8: Rice buffer stocks:pressure In better shape 0.50 mains. As we mentioned earlier, we local0.50 prices shot up. But, regional rice ppt increase in headline inflation 40 ppt increase in headline inflation believe inflation is likely to prove to prices 0.40 also in response to temporary 40 0.40 M illion M etric Tons 30 beMquite sticky export0.30 bans (in India, China, Vietnam illion M etric Tons across Asia in the next 30 0.30 few months, preventing central banks and Cambodia) and panic buying by 20 0.20 20 0.20 large rice importers (like the from aggressively easing monetary several 10 0.10 policy. So, while core inflation is the 10 Philippines) as well as consumers.

0.10 0 main culprit, keep an eye on the price As0.000.00 a consequence, the price of 0 Philippines s ia Indonesia IN VN ID PH CH JN KR M EC ofTHrice rice more than tripled in aMalay few short Philippines Malay s ia Indonesia IN TH VN too.

ID PH CH JN KR M EC Jun-08 Aug-11 Jun-08 Aug-11

Source: CEIC, HSBC Source: CEIC, HSBC

Source: USDA, HSBC. MEC refers to major exporting countries Source: USDA, HSBC. MEC refers to major exporting countries

opinion

richard branson The CEO is not always right

I “Innovation is about change – and when your plans to introduce a new product or service don’t work out, sometimes you have to adapt to changing circumstances instead of forcing your competitors to play catch up.”

am not always right. I can admit this without embarrassment, because it is true of all other business leaders and entrepreneurs. It can be a difficult thing for an executive or manager to acknowledge to employees – never mind put in print – but it is something that anyone who accepts a leadership position should keep in mind.

My management team says 2003 wasn’t exactly a vintage year for our group. Around the time Apple introduced its iPod personal music player in 2001, a couple of very bright people from Palm sold me their own funky version of the MP3 player and a range of accessories.

Virgin’s management team strongly argued the financial analysis did not stack up and that we would have to sell a very high number of units to make it work. I insisted we push on and launch our very own MP3 player, Virgin Pulse!

I felt the product fit well with our brand, our music business and our heritage.

What went wrong with the CEO’s decision?

We spent $20 million designing our MP3 player and bringing it to market. Though that product and its successors were critically acclaimed in the United States, the Virgin Pulse bombed, and we had to write off our investment.

Why didn’t our product work? Because Apple had an unbeatable strategy.

For Apple, 2003 was notable because it launched its iTunes store that year as the company simultaneously pushed down iPod prices very quickly. If a company drives down the

retail price of an innovative new product fast enough when it is still the dominant player in the new market, no one else can catch up because they can’t make enough money from their new products. When Apple introduced the cheaper, smaller iPod nano, it slammed the door on anyone else trying to build a significant market share in the digital music business. And yes, I did freely admit that I was wrong; that helped us to exit the market within two years, before we lost even more money.

The courage to face what went wrong It can be very hard to own up to your mistakes when a big investment is not salvageable – especially when it is a cause you alone have championed.

This fear of embarrassment prevents many chairmen and bosses from doing their jobs properly and addressing the situation when it is most urgent. If the business is disappearing, you must face your team and start looking into what is going on – and the sooner, the better. Only by leaving the safety of your office and sampling the product or service yourself, studying the competition’s offerings and generally turning your operation upside down will you get to the bottom of what has gone wrong.

When you have uncovered the problem, get the right people working on fixing it. In this situation, honesty is the only policy. If you speak openly and bluntly about why you had hoped a strategy would work, why this proved to be wrong, and how you and your

team arrived at the solution you want to put in place, then your people will be better able to implement it. This is not the time to hold back information or pass the blame. This may be one of the more difficult moments of your career, but you will not lose people’s trust and respect by taking responsibility for the problem and admitting to your mistakes. People look for leaders to make informed decisions, not to be infallible.

If you discover that the problem was in the implementation of a service or product, do not make the beginner’s mistake of firing those responsible. Blame and recriminations may offer a spiteful sort of short-term comfort, but they will be toxic to your company and will stunt your recovery or the launch of future enterprises. It’s unlikely that you will even need to talk to those employees about where they went wrong; if you provide all the information necessary, they will know what they did and be very eager to prove that they can get it right. If you keep your team together, you will close the door on rivals who might benefit from your mistakes by hiring the very people who have just learned the lesson the hard way.

Innovation is about change – and when your plans to introduce a new product or service don’t work out, sometimes you have to adapt to changing circumstances instead of forcing your competitors to play catch up. As I’ve written before: Move on. If that means taking a hit, then take it on the chin. Don’t even think about it again. Just move forward.

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 27

numbers

Will you invest in digital media?

Would you access internet through Mobile Phone in next 12 months?

Activities done on a mobile phone in 30 days Southeast Asia Countries

Tapping into this growing demand for “anytime, anywhere” Internet access, Nielsen has just announced enhancements to its website tagging service, Market Intelligence, enabling website owners to, for the first time, monitor the make-up of traffic to their sites based on device type.

Nielsen’s enhanced Market Intelligence service will also report on the ultra-competitive operating system (OS) space, comparing Microsoft’s Windows OS with others such as Mac OS, iOS (the operating system used on Apple’s iPhone and iPad) and Android.

“With the lion’s share of Internet activity being driven by PCs, Windows remains the front-runner in

Source: Nielsen Global Online Omnibus

operating systems,” observes Bruce. “If we look at operating systems in use for Smartphones or

Source: Nielsen Global Online Omnibus

Tablets specifically, however, these numbers look quite different. As non-PC Internet activity continues to ramp up, operating systems such as iOS and Android will begin to account for a much larger portion of web traffic.”

Bruce notes that for those in the business of creating content for the Internet, such as media owners,

understanding the types of devices and operating systems consumers are using to access websites Intended Internet usage by device (next 12 months) is critical to ensuring their content is tailored appropriately. in Southeast Asia Chart 1: Intended Internet usage by device (next 12 months)

Most time spent on TV and internet Number of hours spent with media and entertainment in a typical day

85%

73%

71% 61% 48%

20%

18%

E-book Reader (e.g. Amazon Kindle)

20%

In-home video game system ( e.g. Playstation 3 orXbox 360)

Source: Nielsen Global Consumer Survey, Q310

Television at home

Handheld multimedia device - not a phone (e.g. iPod Touch, PSP)

Public computer (e.g. Libray, Internet Cafe, Gym)

Mobile phone

Computer (any)

Computer at work

Computer at home

24%

Television (any)

33%

About Nielsen Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with Source: Nielsen Global Consumer Survey, Q310 leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.

Base: All respondents aged 8-24 Source: Synovate Young Asians Survey 210

2 of 2

Social media strategy: 50/50 Base: All marketers (N=321)

Type of agency to turn to...

Social media strategy

#/ ## denotes small sample base, caution should be noted when reading the figures Do you have a social media strategy?

Source: Synovate Media

Do you have a social media strategy?

Source: Synovate Media

For more information contact: Nielsen, Margaret Lim (margaret.lim@nielsen.com); Synovate,Tim Hill (Tim.hill@synovate.com)

28 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

co-published coRporate profile

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InterCall has established itself as one of the best in the industry, having been awarded the Asia Pacific Conferencing & Collaboration Service Provider of the Year Award by Frost & Sullivan from 2008 to 2011. In the next five years, the company will focus on expanding existing Unified Communications solutions, and bringing communications solutions to customers worldwide.

CONTACT InterCall Singapore 15 Hoe Chiang Road #20-01/02 Tower Fifteen Singapore 089316 Tel : +65 6223 8822

www.intercallapac.com

PROPERTY

Top residential transactions LOCALITY

PROJECT NAME

EUHABITAT OCR BOATHOUSE RESIDENCES OCR BLOSSOM RESIDENCES OCR THE LUXURIE OCR RIVERPARC RESIDENCE OCR PARK RESIDENCES KOVAN OCR SEASTRAND OCR AUSTVILLE RESIDENCES OCR THE MILTONIA RESIDENCES OCR CENTRA LOFT RCR VIBES @ EAST COAST OCR THE URBANITE RCR JOOL SUITES RCR SKYLINE RCR THE MINTON OCR D’LEEDON CCR THOMSON GRAND RCR WOODHAVEN OCR UBER 388 OCR PARC BLEU OCR VACANZA @ EAST OCR WATERFRONT OCR WATERVIEW OCR BUCKLEY CLASSIQUE CCR CENTRO RESIDENCES OCR THE CANOPY OCR EIGHT OCR H2O RESIDENCES OCR SILVERSEA RCR SKYSUITES@ANSON CCR REFLECTIONS AT KEPPEL BAY RCR THE WATER EDGE RCR SUITES 28 RCR THE INTERWEAVE RCR THE LAKEFRONT RESIDENCES OCR WATERFRONT KEY OCR 38 I SUITES RCR NOTTINGHILL SUITES RCR THE INTERLACE RCR WATERFRONT GOLD OCR ADRIA CCR ALTEZ CCR ASCENTIA SKY RCR BELYSA OCR LE REGAL RCR NV RESIDENCES OCR THE VERMONT CCR D’ CASTILIA RCR DOMUS RCR HEDGES PARK CONDOMINIUM OCR ISUITES @ PALM OCR MY MANHATTAN OCR SUNNY PARC OCR THE TENNERY OCR URBAN RESIDENCE OCR CLOVER BY THE PARK RCR CORALIS RCR ESPARINA RESIDENCE OCR FLORIDIAN RCR GILSTEAD TWO CCR LANDED HOUSING DEVELOPMENT OCR LAVERNE’S LOFT OCR Source: Urban Redevelopment Authority

30 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

DEVELOPER

Transurban Properties Pte Ltd Easthouse Propperties Pte Ltd Grand Isle Holdings Pte Ltd Keppel Land Realty Pte Ltd Qingjian Realty (Punggol) Pte Ltd Kovan Central Pte Ltd Precious Sand Pte Ltd MaxLee Development Pte Ltd Hoi Hup Sunway Miltonia Pte Ltd Trident Development Pte Ltd Oxley Module Pte Ltd Hertford Development Pte Ltd SJ Capital Pte. Ltd. Bukit Sembawan Peak Garden Pte Ltd Morganite Pte Ltd Luxury Green Development Pte Ltd Tampines Court Pte Ltd Caseldine Investments Pte Ltd Precise Development Pte Hoi Hup Sunway Property Pte Ltd FCL Peak Pte Ltd Sim Lian (Tampines One) Pte. Ltd City Developments Ltd Eunos Link Technology Park Ltd MCC Land (Singapore) Pte Ltd Yishun Gold Pte Impac Holdings Pte Ltd Marina Green Ltd Arcadia Development Pte Ltd Keppel Bay Pte Ltd Pinnacle Development Pte Ltd Wenul Properties Pte Ltd BS Tanjong Katong Pte Ltd Keppel Land (Mayfair) Pte Ltd FCL Peak Pte Ltd Sustained Land Pte Ltd Mequity Pte Ltd Ankerite Pte Ltd FCL Peak Pte Ltd Jumbo Valley Pte Ltd Bishan Properties Pte Ltd Winpride Pasir Ris EC Pte Ltd Fragrance Realty Pte Ltd Hong Realty (Private) Ltd Bukit Sembawang View Pte Ltd Castilia Development Pte Ltd Lakeview Investments Pte Ltd Tripartite Developers Pte Ltd I Development PteLtd CEL-Simei Pte Ltd Khoo Realty Pte Ltd Dollar Land Singapore Pte Ltd Wee Hur (Paya Lebar) Pte Ltd Sim Lian (Bishan) Pte Ltd Grovehill Pte Ltd FCL Compassvale Pte. Ltd. Orwin Development Ltd Chedstone Investment Holdings

Fragrance Homes Pte Ltd Asimont Holdings Pte Ltd

PROPERTY TYPE Strata Landed NonLanded Exec Condo Non-Landed Exec Condo Non-Landed Non-Landed Exec Condo Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Strata Landed StrataLanded Strata Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Exec Condo Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Exec Condo Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Non-Landed Exec Condo Non-Landed Non-Landed Landed Non-Landed

TOTAL UNITS NO. OF LAUNCHED UNITS IN IN THE PROJECT MONTH 748 526 493 277 602 0 622 180 504 0 41 41 473 0 540 0 30 410 0 47 0 117 46 46 0 52 10 283 0 1145 0 1715 0 361 0 337 0 95 10 55 0 473 0 561 0 696 10 64 0 329 0 406 0 654 0 521 0 383 0 360 10 1129 0 98 0 64 0 169 0 629 0 437 0 120 0 124 0 1040 0 361 0 105 0 280 4 373 0 315 84 88 0 642 10 158 0 28 0 104 0 501 0 64 0 301 3 11 0 338 0 47 0 616 0 127 0 573 0 336 0 110 7 9 0 44

MEDIAN UNITS PRICE SOLD ($PSF) IN IN THE MONTH THE MONTH 1015 439 898 202 706 176 1053 151 686 72 1529 39 929 33 713 26 845 24 1237 22 1433 21 1478 18 1668 16 1920 16 905 15 1537 14 1314 14 995 14 1372 13 1324 11 1090 11 1183 11 870 11 2086 9 1508 9 661 9 818 8 965 7 1620 7 2063 7 1781 6 1073 6 1206 5 1414 5 1074 5 956 5 1394 5 1519 4 1090 4 919 4 1780 4 2702 4 1350 4 622 4 1257 4 842 3 2705 3 996 3 1312 3 826 3 1186 3 1208 3 856 3 1353 3 1201 3 859 2 1457 2 731 2 1778 2 2276 2 1120 2 1398 2

Co-published corporate profile

Will your Cloud weather the coming storm?

Ken Low CISSP GSLC - Senior Manager, Asia Pacific Enterprise Security, Trend Micro Inc.

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loud computing has been compared to the early proliferation of electricity.

Homes, businesses and towns did not want to produce or rely on their own source of power. They began connecting into a greater power grid, supported and controlled by power utilities. Along with this utility connection came time and cost savings, in addition to greater access to, and more reliable availability of power. Similarly, cloud computing can be beneficial for both service providers and enterprises. Through it, enterprises can achieve significant benefits such as flexibility through outsourcing of software and hardware, greater efficiency in IT spending, and more choices for computing resources.

New security risks Virtualization is a key building block and enabler of cloud computing. This is because virtualization technology eliminates the old “one server, one application” model and enables multiple virtual machines to be run on each physical machine. This enables corporate datacenters and cloud service providers to improve the efficiency and availability of their IT resources and applications, which leads to the benefits of cloud computing. However, virtualization introduces new and powerful security risks to cloud computing that cannot be addressed by traditional security solutions alone.

Cloud computing introduces these new security risks: • Inter-VM (virtual machine) attacks – traditional network security devices have no visibility to inter-VM attacks • Resource contention – anti-virus scanning

and signature file updates on each VM can put excessive load on the host • Instant-on gaps – Dormant VMs may not be kept up-to-date • Complexity of management – proliferation of VMs leads to increased complexity in consistent security policy enforcement • Vulnerability exploits – attacks on system and application vulnerabilities that are unprotected as IT support is unable to keep up with the patches for different types of operating systems, applications and virtual machines A new security paradigm for the cloud Security needs to be changed to support cloud computing. The old methods of traditional security are not good enough to thwart new forms of threats in the cloud. The key solution to this problem is: the host server or endpoint must protect itself. Adapting your security perimeter and applying security mechanisms as close to the virtual machine as possible will deliver optimal protection while maintaining the performance and flexibility of your virtualised servers. This VM-centric focus allows customers to achieve security without significant impact to their cloud infrastructure. Applying comprehensive security mechanisms at the VM enables virtual machines to become selfdefending against the increasingly sophisticated attacks launched by professional hackers.

“Security needs to be changed to support cloud computing. The old methods of traditional security are not good enough to thwart new forms of threats in the cloud.”

Trend Micro provides an agent-less approach that integrates at the hypervisor level, which can ensure all virtual machines are protected.

Customers can access their applications that can be located in the datacenter or in the public cloud. With the hosts being able to defend itself, all corporate servers are protected, whether in the private, hybrid or public cloud.

Additionally, cloud encryption technology, available from Trend Micro, will enable your data to be moved around the cloud safely and confidentially. The encryption keys are unique and controlled by customers themselves so that data is secure even in a multi-tenant cloud environment.

Here are some best practices and recommendations for virtualization and cloud security: • A virtualization-aware solution and approach that offloads security functions to a virtual appliance will prevent resource contention and excessive load on the host servers • An agentless-approach to improve VM performance and reduce management complexity • A security solution that integrates with the hypervisor (e.g. VMware vSphere) for inspection of inter-VM traffic and file activity within each VM • Eliminate the need for scanning of clean baseline images to increase efficiency of host • Improve virtualization ratio to maximize cost saving benefits • Use virtual patching to protect system vulnerabilities before patches are available or applied Enterprises that are seeking help to support their cloud security initiatives should also ask their vendors these key questions: • As virtualization is a key enabler of cloud computing, does the security solution support the latest security APIs from virtualization platform vendors such as VMware?

• Do they have solutions that manage and protect tablets, smartphones, and other consumer devices in the corporate environment?

• What is the vendor’s cloud-client architecture? How do they leverage cloud computing to deliver more effective protection against new threats such as virtualization attacks and Advanced Persistent Threats (APTs)?

The transition to virtualization and cloud computing will create security lapses and vulnerabilities, and it necessitates customers to work closely with a security partner to provide effective security during all stages in the transition. This vendor should offer a strong track record of host-based security and present a thoroughly-considered vision of the future.

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 31

OPINION BY alexander knight alexander knight Director, Dachex Corporation alex@dachexmedia.com

Asia targeted by Russia

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arly on in 2011, the first 300,000 barrelsa-day oil pipeline was opened linking the world’s biggest oil producer, Russia, to the biggest energy consumer, China.

And in 2010, Asia accounted for a little over a quarter of all Russian trade.

Business is still booming in this part of the world and this year’s Russian-Singapore Business Forum (RSBF), originally established to form a closer relationship between Russia and Singapore, had over 800 delegates from around the region.

The forum has evolved into a more regional role, bringing Russia closer to Asia’s emerging markets, and is a leading networking platform for business elites from Russia, the Commonwealth of Independent States and the Asia-Pacific region.

“The RSBF has achieved much this year. The highlight for RSBF 2011 is the shift in focus to emerging markets because we have witnessed for ourselves in the last three days that there are numerous opportunities waiting to be unearthed in Russia and Asia, and the businesses are all eagerly waiting to tap on them to grow and expand into new boundaries,” said Ambassador Michael Tay, Executive Director of the RSBF and former ambassador to Russia.

As Asia takes over the reins of global power, raw materials suppliers are queuing up to supply the growing region. Russia, fortunately, constitutes about half of the Asian land mass and is keen to do business and share expertise with the still growing region.

Russia is eager that some of the Tiger economic shine will rub off on its top-heavy petro-dollar driven economy. According to delegates, there are many issues that need overcoming in the former Soviet Republic, but the common chorus is that Russia’s position on the Corruption Perceptions Index must rapidly improve.

The achievements of the 2011 RSBF There were two significant announcements, which gave a boost to an otherwise uneventful RSBF: a partnership between the Moscow School of Management Skolkovo and the Singapore Management University (SMU) on the opening of the Centre for Emerging Markets. Vladivostok Air also announced the opening of air routes between Vladivostok and Singapore.

When asked by Singapore Business Review for the three most important achievements from this year’s forum, Ambassador Tay responded: “First, 32 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

the reach of the RSBF this year has expanded to include businessmen from more than 35 countries across the world. This means that the RSBF has evolved into a global platform bringing to the table both emerging markets and developed economies.”

“Second, at a time of economic uncertainty in the developed world, our focus on emerging markets struck a chord with the businessmen attending the RSBF. We provided a snapshot of the potential of the key and next generation emerging markets, including China, India, Indonesia, Vietnam, Malaysia and Mongolia and even Taiwan. In the context of the RSBF, the Singapore Management University and the Skolkovo Moscow School of Management established a Centre for Emerging Markets to focus on research that would serve businessdriven interests. The networking was also significant and many link-ups were arranged even before the forum.”

“Third, the RSBF has sought to make itself a B-to-B platform and we have achieved that with focused roundtables looking at real estate investment strategies and the value of industrial parks as a model for the Russian regions. The idea behind the RSBF has always been to create business success stories out of the networking and exchanges among the businessmen. I expect to see a few successful tie-ups over the next year, including in technology, real estate and F&B.”

Russia says ‘hello’ to Asia!

“

RSBF this year has expanded to include businessmen from more than 35 countries across the world.

sponsored content

Soon enough the Singaporeans will have a unique chance once again to taste real European meat. During the Asia Pacific Food Expo 2011, which will take place between November 17th and 21th 2011 at the Singapore Expo Hall 4 at the A25 stand, the European Union meat producers will exhibit their meats and cold cuts of highest quality, including fresh, chilled and frozen beef, veal and pork as well as products containing those ingredients. Meat and cold cuts are a significant element of a balanced human diet it is vitally important that they are natural products, rich in nutrients and of high quality.

In Europe we emphasize the value of the natural methods of production as well as make use of large open space where animals are raised in natural conditions. The pure water, green grass and space are the essential elements determining the unique flavor of meats and cold cuts.

Cattle and livestock, as well us the fodder used undergo strict veterinary inspections, which guarantees 100% richness of the meat and its complete gamut of flavor.

European meat and cold cuts producers make use of advanced technology, own their own sewage treatment plants and are fully computerized. They also run an international tracing system. Their machinery stock and trimming lines are upto-date, as well as their transportation stock. Meat is obtained in a humanitarian manner, with the application of good manufacturing practices which comply to the ISO trade norms and HACCP standard. The meat and its derivative products are results of a particular method of production, undergoing inspections at every stage of slaughtering, processing, storage and distribution.

An important element which decides about the quality of European meat and cold cuts products is the preservation of their traditional taste, smell and look, ensured by the application of modern technologies. Traditional European cold cuts, produced according to well-proven and long-standing recipes have for years enjoyed popularity among consumers, a proof of which can be the numerous awards received both from European purchasers and those from outside of the EU. Thanks to their unmistakable quality, the meat and cold cuts from the European Union can be equally well consumed as unprocessed products, as well as be chilled or frozen. This is why they constitute a product suitable to be exported, even to the most distant receiver.

During the Asia Pacific Food Expo 2011 will cover the natural processes of raising animals, animal health protection methods, as well as the production process alongside the final product: meat, meat derivatives, and cold cuts. It will be possible to taste the European cuisine dishes and to know a wide range of cold cuts. Films, advice and even live cooking shows will present a unique opportunity to appreciate the values of European meats and cold cuts.

The Singaporean connoisseurs who have savored European meats judge highly the flavor, long life and the looks of these products, a result of traditional techniques of production. They constitute a certain novelty in the Singaporean cuisine and can be the attraction of every table, as well as providing satisfaction to the most demanding gourmets.

Details about the program EUROPEAN TABLE TRADITION, MODERNITY, QUALITY, as well as information about European meat and its producers, the Association of Butchers and Producers of Processed Meat of the Republic of Poland are on our website

Co-published corporate profile

CIGNA: Leader in international healthcare market

Service with a global reach Competing in the international health insurance market, CIGNA International maintains its high quality services and takes a big step to lead globally through its wide reach.

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s a global health service company, CIGNA International has sales capability in 29 countries and jurisdictions, and services expatriates and global mobile individuals virtually everywhere in the world. It maintains a global workforce of more than 3,500 experienced professionals and a distribution force of some 8,500.

With its wide reach and high quality services, CIGNA International has indeed made its name in the international health insurance market. But while this sector is a specialised market, it’s also an area of the business where quality and service is crucial. Eng Boon Tan, Business Development Director for CIGNA Global Health Options (CGHO),

outlines the key features you should be looking for from anyone offering their services in the international healthcare market.

It is relatively easy to deliver high quality medical care in your own domestic environment, where the patient is familiar with the language, culture and processes. But delivering the same quality of care and peace of mind in unfamiliar, sometimes hostile territory presents its own specific challenges.

Where standards and costs vary dramatically and the patient will be feeling at their most vulnerable, expertise and experience at mitigating those risks really comes into its own.

Yet all too often insurers operating in this market have developed their international proposition around what they offer to domestic groups, for example - increasing the benefit levels to attract globally mobile individuals. But it’s an approach that has not gained the market a reputation for service excellence among customers. This is because international products available in the marketplace are not homogenous and can vary quite significantly. So what are the key

Eng Boon Tan, Business Development Director features to help you uncover the very real differences in the benefits and services on offer, subtleties in plan offerings and the practises that need careful analysis? What should you be looking for from an international private medical insurance provider?

First, it is of vital importance that you check the company’s background. See if it has enough experience and proven track record in delivering worldwide healthcare.

Next, the provider should be accessible. It has to have fast and easy access to an unrivalled network of healthcare professionals and facilities all over the world.

You also need to ensure you get your money’s worth, so another feature should be upfront payment of treatment or reimbursement within 5 working days as well as payment of claims in your own currency.

Next, access to service and medical advice should be available for you 24 hours a day, seven days a week. And ultimately, you should be able to tailor your plan to get the cover that’s right for you and your family.

CIGNA International Eng Boon Tan, Business Development Director, Singapore Tel: (+65) 6391 9525 www.cignaglobal.com

“With its wide reach and high quality services, CIGNA International has indeed made its name in the international health insurance market.”

34 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

HONG KONG VIEW

Tim hamlett Business vs Politics

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Chamber of Commerce is a wonderful thing, and this is just as well because Hong Kong has a good many of them. No doubt they provide a useful service for their members, and for business in general. I fear that they probably also provide some exercise for my favourite Adam Smith observation, which goes “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” This does not matter too much, as long as the conspiracy or contrivance remains private.

The link in politics and business However a Chamber or a set of chambers are playing a dangerous game if they allow themselves to get caught up in politics, and the danger is not to them alone. The interests of business are, generally speaking, something of which most people are more or less in favour. Prosperous businesses mean a prosperous society. Political groups and interests will rarely explicitly aim to inconvenience or curb business. Even if their proposals are not welcome, they will be presented as in the interests of their victims. But a political programme is a package, which seeks to appeal to a wide range of people by offering to serve their interests. If it appears that one party has a monopoly on business support, then the others will feel no compulsion to help business generally, and indeed no compunction about hindering it.

That is not to say that chambers should ignore political matters which clearly affect business, like regulations governing particular trades or the state of the economy generally. Nobody minds groups who have interests arguing their corner if those interests are affected. But what chambers must do is to refrain from matters which do not concern commerce as such, but concern the politically engaged a great deal. For this reason I was concerned, nay appalled, by the report which stated that the government’s effort to abolish by-elections was a response to a consensus among chambers of commerce that something should be done about the problem. The rather fragile public interest hook on which this opinion depended was the notion that the By-elections Which Were Not a Referendum had wasted a certain amount of public money.

I realise that the government is fairly desperate for excuses, after incurring public odium for proposing a bad solution to a nonexistent problem. So it may be that the consensus was not as firm as the report made it appear. But there should not have been a consensus at all. Chamber members as such have no interest at stake in the occasional by-election. The cost to public funds is a red herring: the government has money coming out of its ears. I do not doubt that many chamber members thought the by-elections a waste of money, and many others thought them a fine idea. Businessmen are no more or less protective of public funds than the rest of us. On general political matters they have a wide range of views and if they want to put them before the public

36 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism

they can join a political party. But this is not a matter on which a chamber should have an opinion at all. It is, as it were, none of their business.

The perks of being a mega rich businessman There is a cost to this. Most Hong Kong people understand that business as a concept covers a wide range of people and companies.

We know that about 11 people own three quarters of the shares on the Hong Kong Stock Exchange. We know that about the same number of people or organisations control the vast majority of Hong Kong’s real estate. These two cricket teams, which overlap considerably, involve mega rich people who do not have to ask the price of anything. They can donate whole universities to their ancestral villages, buy babies by the litter, decorate their wives and mistresses with adornments costing the price of a small flat, and so on. When people talk about “collusion” or “developer hegemony”, this is the group they have in mind. The people in this group are generally neither liked nor trusted, and nobody outside it supposes that they need any help in protecting their interests.

But most of us recognise that “business” as an activity covers a great deal more than this. There is public sympathy for dying trades, for struggling proprietors in fickle markets, for young people who want to risk everything to be their own boss. Business, in Hong Kong, is a respectable career and there is support and sympathy for most of those who pursue it. This, however, is not guaranteed.

If organisations representing business appear to be siding with the government, or with the First XI, against the rest of the population, then opinions about business will change.

Spokesmen for the chambers, or some of them, will no doubt wish to claim at this point that actually the public is as exercised by the problem of expensive by-elections as they are. If the chambers are going to get into the habit of reflecting views which have no particular connection with business, then they are going to start upsetting people. And it is only a matter of time before someone misreads the runes and reflects a view which is not widely held at all, whether that is what has happened in this case or not.

People who are in a position to speak for business have an obligation not to speak for other things: like themselves, or the government, or the political opinions of their fellow committee members. Of course we have to leave it to chamber members to keep an eye on this. There is a tendency for people in leadership roles in such organisations to be from large firms with a welldeveloped habit and need to be on good terms with the government. The rank and file members are more likely to include representatives of small firms who just regard the government as an expletive deleted nuisance.

Whether either of these approaches is correct is not the point. The point is that politics involves fights, sometimes bitter fights, over issues which people view as matters of principle. The golden rule when you see a fight is: do not join in.

Huh! Money? That’s easy.

Healthcare feature

Wayne Spittle, Senior Vice-President and Commercial Leader, Philips Healthcare - Asia Pacific

Worthy of investment

To illustrate, current use of home healthcare in Singapore is largely restricted to selfmonitoring devices, such as glucose and blood pressure meters. Even sleep solutions and home respirators are hardly used, because cost has to be fully borne by patients and families. Remote monitoring products have been introduced to the market but never became very popular because of access to low-cost alternatives, such as live-in maids and simple alarm systems that make a loud noise which neighbors can hear. Telecare products have only been used as part of research and pilot projects so far.

Philips Home Healthcare, a global leader in the home healthcare space, is playing a significant role in overcoming the challenges mentioned above. Philips is collaborating with major hospitals in providing comprehensive home healthcare system to address many healthcare challenges of an aging population such as Singapore’s.

Philips as a key player in home healthcare Philips recognizes that there are four pillars of a healthy life - good nutrition, physical Importance of healthcare and its fair share in everyone’s investments exercise, healthy mind, and sleep. Of these four pillars, the most underdiagnosed and Philips Respironics approximately 60% of all deaths globally. less talked about is sleep, and Philips has beome healthcare has always been These figures further accentuate the impor- come an an important player in this area of an integral and critical component tance of home healthcare in care delivery wellness. Philips offers complete sleep care of the healthcare delivery system. cycle in the fucycle solutions After all, who does not like to be treated at ture. to help people “With home healthcare, home? In recent years, the acceptance of cure their sleepAccording to you can deliver more home healthcare has increased even more. Wayne Spittle, ing disorders The increased acceptance is driven by vari- Senior Vice Pres- affordable and accessible from home, ous economic and social trends. one of which is ident of Philips healthcare to patients the continuous Healthcare, “As without having to deal The benefits of home healthcare positive airway the population Firstly, home healthcare helps to reduce ages, you need to with them in the hospital.” pressure (CPAP) the ever-increasing hospital costs. With monitor patients therapy. CPAP advances in the technology and increased in the home. With home healthcare, you therapy is widely seen as the gold standard internet penetration, care can be effectively can deliver more affordable and accessible in the treatment of Obstructive Sleep Apnea delivered in the home environment and in healthcare to patients without having to (OSA). According to research by the Singaturn reduce the number of readmissions to deal with them in the hospital. With aging pore General Hospital Sleep Disorder Unit, the hospitals or clinics. With home health- population and increasing chronic diseases, more than 15% of Singaporeans suffer from care, now care providers like hospitals can it offers great access to healthcare and we’re OSA. Philips Respironics currently has a reduce the costs without compromising on taking it to the next level.” complete solutions portfolio to screen, dithe quality of patient care. The patients also agnose, treat, and monitor OSA. feel better and more independent in their Challenges for home healthcare in SG Philips also offers home respiratory care own homes. Caregivers like families and Although there is an overwhelming con- devices for patients with various respiratory friends make them feel more comfortable sensus among healthcare experts that conditions like COPD, Nuero muscular and they recuperate faster. home healthcare has the potential to relieve diseases, lung cancer, and smoking habits.

Furthermore, rise in prevalence of chron- some of the pressures on healthcare sys- Solutions provided by Philips include deic diseases and an aging population are also tems, adoption of solutions has been slow vices for oxygen therapy, home ventilation driving the need for home healthcare. To- and limited in scope in Asia. According to and airway secretion management at home. day, the world population contains 3.1 bil- RAND Health’s report titled Health and Furthermore, Philips is a leader in prolion adults aged between 20-64, and 390 Well-being in the Home, distortion of incen- viding remote monitoring and telehealth million over 65.1. By 2050, it is forecasted tives, limited health literacy, poor care co- solutions. These solutions are designed to that over 2 billion people will be over the ordination, and limited evidence for clinical help increase physician practice efficiency age of 65. Chronic diseases, such as car- and cost effectiveness are the major obsta- and patient throughput. With greater effidiovasular diseases, stroke, cancer, chronic cles to greater uptake of home healthcare in ciency comes the opportunity for improved respiratory diseases and diabetes, will cause Singapore. care and reduced expenses.

H

38 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

healthcare feature >>

As a strong and reliable brand to consumers, Philips offers great quality and wide range of home healthcare service - from imaging systems, patients’ monitors, and healthcare informatics. “In the economy of Singapore, there’s potential to save money by treating people in the home. You actually save money and reduce the cost in public healthcare, and that includes sleep apnea.

Opportunities are large as we can monitor patients from home with cardiac disease, diabetes, and other respiratory diseases, Mr. Spittle concluded.

Cordlife Group Limited Why you should invest in healthcare Despite of the economic downturn, there is still high demand for better healthcare in Singapore due to the increased living standards in the country.

Specifically for the private cord blood banking industry, we observed that parents have become more knowledgeable about cord blood banking and its life-saving benefits due to the proliferation of information on the Internet. Cord blood banking has become part of their list of things-to-consider as they prepare for the arrival of their baby.

Even though the current economic outlook may look bleak, the healthcare industry as a whole should not really be adversely affected due to its defensive nature. Simply put, if a person is ill, he or she will still have to seek medical treatment. The use of cord blood related therapies falls directly under this category. Hence, the importance of cord blood banking cannot be ignored as it serves as an upstream activity to potential therapies treatable using cord blood. These alternative treatments include certain cancers and blood disorders such as leukaemia and lymphoma.

Accepting the idea of ‘cord blood banking’ Since its introduction in 2001, cord blood banking has gained more acceptance amongst parents. Through constant education on the benefits of cord blood banking to parents, through various channels as well as the success stories of cord blood transplantation that had taken place in Singapore, parents have become less skeptical about its usefulness and realised how it brings benefits to their child and family.

And with the Government allowing cord blood banking services to be paid via the Child Development Account in the late 2008, it is made even more affordable to parents, with a cash outlay of no more than $3,350 for the entire 21 years of storage of their baby’s cord blood.

At Cordlife, we believe in delivering the highest quality of service to our clients. That

is why we continue to invest in 3 areas: People, Technology and Innovation. We invest in human capital, manage our in-house talent and continue to train to build capability and competency. This will enable our employees to be equipped with the necessary skills and knowledge to serve our clients.

This is also why Cordlife Singapore is the only private cord blood bank in the country to invest in the Sepax® automated stem cell processing technology, a process that optimises the stem cells recovery from the baby’s cord blood.

We are constantly looking into product innovation. For CordLife Hong Kong, besides offering cord blood banking to parents, we have also offered the storing of their baby’s umbilical cord, as the umbilical cord is also a rich source of other types of cell lines, namely, the Mesenchymal stem cells and Epithelial stem cells which can potentially treat other diseases like Liver Cirrhosis, Type 1 Diabetes, etc.

We celebrated our 10th year anniversary in 2010, along with the enrolment of our 25,000th client, another milestone achieved by the company. And in the same year, we also released the first-ever autologous cord blood for Neuroblastoma. Recently, we’ve launched the Cordlife Care360○ Safeguard programme, a holistic protection made to ensure that clients enjoy that added peace of mind with Cordlife.

Outlook for healthcare industry Singapore continues to serve as a regional medical hub. In addition to its medical hub status, awareness of the benefits of cord blood banking as well as the ever increasing lists of medical conditions treatable using cord blood stem cells will increase the percentage of take-up for this service. After all, cord blood can only be collected once and that is immediately after the birth of the child. We believe the take-up rate will continue to rise as society becomes more affluent, medical

Mr. Jeremy Yee, CEO of Cordlife Group Limited

Cordlife’s Milestones treatments become more personalised and In 2005, we were the first private cord education about its benefits are made more blood bank in Southeast Asia to be accred- available over different platforms. ited by AABB (formerly There is huge potenknown as American tial in the healthcare Association of Blood “Cordlife believes in industry in the years delivering the Banks), ensuring that to come. This is a good our cord blood processtime to start investing highest quality ing and storage facility service to clients” in a healthcare organimeets world standards. sation that has a sound This shows our combusiness model, good mitment to delivering the highest quality of product/service offering and clear strategies service. to ensure sustainable long-term profits.

In 2009, we released the first-ever autoloCordlife Group Limited is located at gous cord blood for Cerebral Palsy. We also 61 Science Park Road, The Galen, #05launched Cordlife Circle, a members-only 16/17/18, Singapore Science Park II, Singabenefit programme as well as Preferential pore 117525. Visit their website: www.cordPlan upgrades for our clients. life.com/sg.

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 39

co-published coRporate profile

Saving lives with Cordlife

Cordlife Processing Facility

“To date, there are over 30,000 families who have entrusted their baby’s cord blood with Cordlife.”

Cordlife Singapore Headquarters

C

ordlife Group Limited is a leading service provider of stem cell banking from cord blood (Singapore and Hong Kong) and the umbilical cord (Hong Kong).

Cordlife currently owns and operates two stem cell banks with full processing and cryopreservation storage facilities in Singapore and Hong Kong. The Company also has a strategic investment in the only cord blood bank operating in Guangzhou, China. In addition to this, its affiliates also operate in India, Indonesia and the Philippines.

Among the first in Asia The Company’s processing and storage facility, located in Singapore Science Park II, is the first private cord blood bank to be set up in Singapore back in May 2001, and among the first in Asia.

With over 10 years of cord blood banking experience, Cordlife is also the first private cord blood bank in Singapore and South East Asia to be accredited by AABB, formerly known as American Association of Blood Banks, after the audits showed compliance with AABB standards for processing, testing and storage. The Singapore processing and storage facility is also licensed by the Ministry of Health, Singa-

A gift to your precious one pore. This ensures the company meets both international and local standards for cord blood banking.

Cordlife became the first private cord blood bank in Singapore to have a published successful cord blood transplant in 2004, and have since then released another four cord blood units to its clients for cord blood stem cell transplants.

Long-term commitment to clients The Company recently launched its Cordlife Care360○ Safeguard Programme, a holistic protection made to ensure that clients enjoy

that added peace of mind with Cordlife.

Part of the Cordlife Care360○ Safeguard programme is the Cordlife Max:360○, where the Company invests in the Sepax® automated stem cell processing system – a technology that helps to harvest more stem cells from the baby’s cord blood for greater transplant success. With Cordlife Protect:360○, the Company, together with an international insurer, will waive off the child’s future storage payments if either parent suffers from Total and Permanent Disability or passes away. Under Cordlife Pledge:360○, the clients are assured of a cord blood unit of suitable match or US$25,000 to defray medical costs if the cord blood loses its viability at point of transplant. In addition, with Cordlife Assure:360○, the Company will cover the cost for matching and viability prior to the Haematopoietic stem cell transplant. Last but not least, the Company has also taken added insurance coverage to safeguard its clients from financial loss resulting from direct malpractice. This is the Company’s commitment to be with its client for the long-term.

To date, there are over 30,000 families who have entrusted their baby’s cord blood with Cordlife.

CONTACT Cordlife Group Limited 61 Science Park Road, #05-16/17/18 The Galen, Singapore Science Park II, Singapore 117525 Tel: (+65) 6238 0808 www.cordlife.com

legal briefing Not really, it’s actually much stricter, acknowledged Ms Sommers and Mr Hadley. “Those whose compliance programme has been designed to meet the US Foreign Corrupt Practices Act will be well-advised to review it in the light of the Bribery Act. The UK law is significantly broader than the FCPA; consistent with PRC law for example, ‘commercial bribery’ is an offense, whereas the FCPA is limited to corruption of non-US public officials.” Simon Clarke and Sharon Nye, litigation partners from Allen and Overy pointed out that if convicted, companies can face an unlimited fine. “Executives who participate in or have knowledge of bribery may be personally liable, and can face up to 10 years in prison for each offence.”

BEWARE: This act bites!

Bribers beware: British Bobby’s could nick you in Singapore Turning a blind eye to the odd bribe in Asia has been a well established way to smooth business over in some of the more developing parts of the region, but the new UK Bribery act threatens this.

Here is what you need to know to protect yourself from doing porridge.

W

ho should be worried?

You don’t even have to be British to come under its purvue - anyone with a “close connection” to the UK is prohibited from bribing. Ms Tham Yuet-Ming, Partner & Asia Head of Compliance & Investigation, DLA Piper LLP noted that although Singapore has a strong reputation for being a country with low corruption risks, it would be shortsighted for any company with international operations to ignore laws such as the UK Bribery Act. “These are examples of regulations with ‘bite’, and tentacles reaching out to every corner of the world. Companies ignore these laws at their own peril,” she said. Rajah & Tann noted that businesses have expressed a certain level of concern over the new Act as it introduces a more onerous set of rules, with stricter obligations, wider scope, and sharper teeth.

Amy Sommers and Robert Hadley, partners of K&L Gates LLP, said the key provision of the Act - the new corporateonly offence of “failure to prevent bribery” - will apply to any commercial organisation, not only those established in the UK, but also to any other corporate body incorporated outside the UK that carries on a business or part of a business in the UK. Isn’t this just a British version of the US Foreign Corrupt Practices Act? 42 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

Are there any defences to this strict liability offence?

Well, yes, but only if you can prove your company has done all it can in terms of compliance, so expect to go through a course on how not to bribe at your company shortly.

Richard Tollan of Mayer Brown JSM said, “It is a defence if the organisation can prove that it has established ‘adequate procedures’ to prevent the occurrence of bribery.” This explains why many companies have recently gone through a compliance frenzy to establish or enhance their anti-bribery policies. And according to Ms Sommers and Mr Hadley, claiming ignorance is not a defence. “The company commits the offence, even if no-one at the company authorised or even knew what was going on,” she said.

So what are “adequate procedures”?

Mr Tollan suggested that “your interface with the government; not just in the bureaucratic sense but also your dealings with State-owned enterprises which control most key industries and are prevalent throughout Asia,” needs to be looked at. In addition, companies need to know what their third party agents are doing. In other words, it’s not enough to turn that blind eye if you let another company deal with the bribes.

According to Ms Tham, businesses need to realize that getting a sufficiently robust compliance program in place is more than just getting a couple of policies drafted - it is crucial to get experienced specialists who have a real understanding of the types of ‘on the ground’ legal/compliance risks facing a particular industry and in a particular country. “Getting an off-the-shelf policy may be cheaper in the beginning, but the company could end up paying far more if the program does not meet the requirement of ‘adequate procedures.’ Secondly, the compliance program needs to be one step ahead, so it is important to re-assess regularly - what is adequate today may no longer be adequate in two years’ time,” she added.

What about my expense account?

Yes, that too could come in for stricter review if it could be deemed that the entertainment was excessive. Tollan said, “The bottom line is that genuine, reasonable expenditure for business and client relationships development are permitted, but disguised attempts to win or influence the award of business are not.” Allen and Overy’s Clarke and Nye said that companies even need an official policy on entertainment and gifting. Companies need to “set out clear guidance on what action should be taken if one of your employees is faced with a corrupt situation, and on giving and receiving gifts and conducting corporate hospitality.” So it may not be such a merry Christmas in Singapore then.

Co-published feature

Good credit management

If cash is the lifeblood of business and commerce, then credit management is the ‘heart’ that keeps it flowing.

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redit management involves more than just chasing payment and recovering overdue debts. It can also play a significant role in helping protect businesses from the prospect of payment default, by signalling the existence of potential risks before any transaction has even been conducted.

The credit management cycle is a clearly defined process that not only helps maintain cash flow but also makes a significant contribution to the financial health and strength of any business. Credit management involves a set of inter-related disciplines that begin well before an invoice is raised. In broad terms, these are usually defined as:• Credit vetting • Setting of terms and conditions • Invoicing • Collections • Accounts reconciliation • Reporting To provide additional insight on three vital elements of this process, ‘credit vetting’, ‘terms & conditions’ and ‘collections’ are explored more fully below with some key points for consideration.

Martin Jones, Atradius Country Manager for Singapore 44 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

Credit vetting The potential for payment default or even the possibility of a bad debt due to insolvency is an ever-present risk when trading on credit, so the value and importance of obtaining accurate and up to date information on potential customers is vital.

Credit vetting is the process of assessing the creditworthiness of customers to give an indication of their ability to pay when purchasing items on trade credit terms. The value of having this information lies in its ability to help the supplier company decide how much credit to allow their customers, as well as what credit period should be allowed under terms of business.

Credit insurers such as Atradius use a range of sources that enable them to reach accurate credit decisions on companies to ensure that they can provide insurance cover for customers while also being confident that their own credit vetting processes are accurate, robust and up to date.

While specialised credit vetting agencies can also provide this information, individual businesses can also undertake their own research, using publicly available information.

This data can help build a picture of a cus-

tomer’s credit profile by highlighting such items as: • Company name and registration details • Registered office – important to note this address may not be the trading address • Principal activities • Directors & Shareholder details • Legal civil judgements or any criminal cases pending • Internet news and information – e.g.

Google alerts and stock exchange feeds • Company accounts Obtaining the information is one thing, but interpreting it correctly is absolutely vital to build an accurate picture. In short, investing in credit information can often prevent bad debts later. Some areas to look out for that may reveal potential issues include: • Unusual delays in payments • Requests for longer credit periods • Unusual ordering patterns • Sudden switching of principal suppliers • Poor accounts • Lack of investment – visible by visits to buyers’ premises • High staff turnover • Recent change of ownership • Recent change of address • Recent change of scope of activity or activity not in accordance • Recent increase of capital Terms and Conditions (T&C’s) Businesses that do not provide clear terms and conditions of trade, or have only confusing small print on the backs of their invoices, are inviting payment problems. The main features of any terms and conditions should be that they are clear, comprehensive and enforceable. In short, such terms provide a sound basis on which businesses can be protected in the event of a dispute.

However, they are only enforceable if they are stipulated at the time the contract is agreed with the customer and not introduced ‘post-contract’. In credit management terms, T&C’s are a vital part of the process as they detail the key principles on which individual companies do business, including their payment terms, but their importance can often be overlooked.

To help ensure they’re not missed, the following key points should be remembered: • T&C’s help provide trade protection. Always ensure they’re up to date.

Co-published feature

• Where possible, include a ‘Retention of Title’ (RoT) clause within T&C’s. Be aware RoT clauses are not recognized in all countries.

• Avoid buyer instigated ‘purchase agreements’ as these can over-ride your own T&C’s •Ensure customers are aware of the T&C’s before the goods are dispatched • When trading overseas, ensure your T&C’s also comply with legal requirements for credit terms in the buyer’s country.

• Establish a clear and robust credit granting policy that is applied consistently in line with the T&C’s.

• Always ensure buyers are credit-checked

“Our business of credit insurance is all about managing risk and protecting trade.” before trading with them.

• T&C’s should be verified or prepared by qualified legal professionals.

• Always obtain a signature from buyers on any agreed contract incorporating T&C’s.

Collections There is a natural tendency for businesses to be reluctant to part with their cash, particularly in times of financial uncertainty. Delaying payment provides the questionable benefit of improving liquidity at the expense of one’s creditors - even though the bills will have to be paid at some point.

Essentially, there are only two key strategies for collecting a debt - the amicable approach or the legal route. The complexity of the legal process varies from country to country, as specific regulatory requirements and procedures have to be followed in each.

As there is no guarantee of success, the legal approach is generally regarded as a last resort by professional debt collection agencies and many of the businesses that explore this option. In any eventuality, it is always best to seek advice from a professional commercial debt collection agency such as Atradius Collections, before embarking on any legal path.

By obtaining advice and guidance, it will not only be able to explore ways to avoid the legal collection option, but also, as a result of its worldwide experience of dealing with both legal and amicable collections, it will also be able to indicate the likely success rate.

So, what can be done to tackle overdue debts?

• Send an early reminder that payment is becoming due • Segment your accounts by size and amount owing • Ensure the invoice is correct

• Check there are no outstanding disputes • Know your customers • Phone early in the process • Be persistent • Set a DSO (Days Sales Outstanding) tolerance and adhere to it • Call in third party help Credit insurance Running a business of any size is never easy and trading risks are always present, particularly when trading internationally. Credit insurance is simply a way of protecting your business against the risk of not getting paid when you’re trading on credit payment terms.

Once the goods have been despatched and your customer has accepted delivery, they are obliged to pay you by the due date. However, if you don’t get paid, as a result of your customer becoming insolvent, political intervention or other reason, then the credit insurance policy covers you against this potential financial loss.

dom to trade as the risks are covered Credit insurance solutions from Atradius help protect companies throughout the world from the payment risks associated with selling products and services on credit and incorporate the key elements of credit vetting, T&C’s and collections to support good credit management practice.

Businesses that spend the time and effort on front-end processes, such as credit vetting and T&Cs, should experience fewer issues with non-payment and enhance their collections successes when the invoices are due.

Clearly, the tips and advice included in this overview can be used to support and enhance your own internal credit management procedures, or you can choose to outsource part or all of your processes to specialist credit management providers.

It is worth bearing in mind that if you take out a credit insurance policy, most of the elements within the credit management process are already included, which can provide high-

All Customers Credit Vetting

The credit management process

Established Contract / Terms and Conditions Invoicing Collection

Accounts Reconciliation

Reporting

to Sales Force and FD

As a result, credit insurance is regarded as an essential part of the credit management process by countless businesses across the globe, whether they’re multi-nationals or smaller businesses as it provides a range of benefits, including:-.

• Protection from the risk of customer nonpayment • Reduced risk of bad debts • Improved cash flow • Improved credit management processes • Up to 90% of contract value is covered and paid as a result of a claim • Credit insurance policies usually include a professional collections service • Flexible, tailored cover to suit your precise business needs and risk profile • Improved access to finance as banks regard credit insurance as a positive indicator • Provides enhanced stability and the free-

ly effective support to your internal systems or operate as outsourced solutions.

Atradius provides trade credit insurance, surety and collections services worldwide.

It has a presence through 160 offices in 42 countries. With access to credit information on 60 million businesses across the globe, the company makes more than 22,000 trade credit limit decisions daily.Our business of credit insurance is all about managing risk and protecting trade. Good credit management practices are vital to ensure payments are received on time and disruption to cash flow is minimised.

For further information on credit insurance and its role in supporting credit management, visit our website: www.atradius.sg. You may also contact Martin Jones via email: martin. jones@atradius.com or call us at +65-6372 5300.

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 45

OPINION

Anthony Coundouris Why Groupon creates no loyalty, but Foursquare might

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n recent months, there have been much speculation about the long-term viability of daily deal sites (also called group buying sites) like Groupon. Group buying has long been a popular means for consumers to pool cash together and create greater bargaining power. According to Needham & Company LLC, by 2015, the daily deals market will generate US$10.3bn revenue per year globally.

Since Groupon began two years ago, 600 new deal sites have launched globally. Singapore has at least 10 prominent local daily deal sites, with 7 appearing in the top 500 most popular sites in Singapore.

Despite the popularity of daily deal sites, there are question marks over the business model’s sustainability.

High cost of marketing The daily deal model requires an intense amount of display advertising and email campaigns. Any startup company today that requires enormous amounts of cash to convince customers to buy their products or services is in trouble. Marketing alone will not make a product or service sticky.

Low barriers to entry Daily deal sites like Groupon add little value other than to offer a deal, which can easily be replicated.

Currently Groupon has no IP or differentiation from which the company can defend against invading competitors. Even its method of marketing using email and display advertising is outdated.

No loyalty for retailers If you have ever run a food and beverage outlet, you will know one night of understaffing and bad service can kill the reputation of the business. What’s worse, ‘deal-hungry’ customers can be detected by ‘full-

anthony coundouris Business Operative, Futurebooks

Daily deal sites in Singapore

Traffic Rank*

Deal.com.sg

45

Bigdeal.sg

94

Outlet.com.sg

139

AllDealsAsia.com

213

ilovedaeals.sg

249

Singsale.com.sg

255

Alldealsleak.com

460

Source: Alexa.com

Location-based deals therefore build better customer loyalty to retailers by positioning the retailer as relevant and convenient. To date, Groupon blindly serves deals based on consumer preference.

Qualify the customer first Credit card companies like American Express take the time to carefully qualify the visitor.

The retailer sustains a period loss, knowing they are attracting the right type of customer. Think of credit card companies as a way to ‘outsource loyalty’.

The card functions as a gatekeeper to preventing the wrong type of customer redeeming a promotion.

A retailer may have no issue accepting a $4 loss on a bowl of soup, if they knew the customer eating the bowl of soup made $50k in salary per year, and could afford to pay the full price of $10.

Enter Foursquare What Foursquare has done well is to create a “...by 2015, the daily deals market will generate new kind of loyalty model using social rewards. Loyalty to an outlet is not created by US$10.3bn revenue per year globally.” credit card points or 50% off deals, but by how Foursquare moves users up the social ladder.

While Facebook and LinkedIn reward users by paying’ customers. Loyal customers can sense what telling others how many friends and connections you is happening in the restaurant. This experience is have, Foursquare is about badges and mayorships. likely to tarnish the brand’s reputation and deter loyal Unlocking ‘badges’ is a gaming element, which has customers from returning. made social gaming platforms like Microsoft’s X-Box Groupon’s model takes a hefty share of the profits.

Groupon passes a 50% discount to the consumer, and 360 very sticky.

If Foursquare continues to develop social rewards then takes 50% of the remaining amount. So if a bowl using badges and mayorships, they stand to become a of soup retails for $10, the retailer is left with $2.50 – powerful loyalty platform for retailers. well below break-even.

46 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

Top daily sites in SG

sbr event hospitality operations do not rate on many of the international polls, where the competing destinations of Hong Kong, Bangkok, Kuala Lumpur and Indonesia follow closely in destination rankings, but interestingly also have multiple products listed in the global rankings.

The challenge among SG’s hoteliers Fancourt added that standards of product and service are slipping when compared to the ranking of the destination and the competition. He said Singapore hoteliers need to identify new ways to operate their businesses more effectively in a rising labour market, whilst still delivering ‘Asian Hospitality’. The industry needs to develop more sophisticated operating models to remain competitive, or move toward a Western hospitality model where the level of service standards is aligned with the higher cost of Simon Littlewood, ACG Global President, with Alain Mahillon, General Manager of Hilton Hotel operations.

SBR Hotel and Hospitality Conference Tim Charlton, Editor-in-Chief of Singapore Business Review magazine, provided a quick assessment of the market outlook for the hotel industry by discussing the findings of the Horwath HTL Global Hotel he Hotel & Hospitality industry has talked about his view of “Brand Marketing Market Sentiment Survey in 2011.

According to Mr. Charlton, global sentibeen going through constant inno- in the Internet Age”. He said the Internet vations in order to further improve Age has significantly enabled access to and ment is trending in the right direction as the quality of providing efficient customer expansion upon brand communication and industry demand is slowly increasing. He service and experience. The Hotel & Hospi- commercial opportunities; and one impor- said that the outlook for 2011 is positive for all regions. tality Insights Conference was held last Sep- tant driver of success will be Simon Faure-Field, CEO tember 6 at Hilton Hotel, Singapore to help to visualise the next great en“Singapore of Equal Strategy said that equip hotel & hospitality professionals with abler phase after the Internet, is rated the besides the phenomenal the necessary leadership and management which will be coming soon. number five growth in Hospitality across skills to steer their enterprises forward. Top According to Mark Fanleaders of the industry tackled the best prac- court, VP for Information destination in Asia, guest experience and service levels are gradually tices and market outlook for the field. Over Technology at Pan Pacific the world.” improving, however still vary 50 representatives of the leading hotels and Hotels & Resorts, Singapore organizations in the industry were present is rated the number five destination in considerably. Each market has its individual during the event. the world by the travelling community in blend of foreign and local operators, at difvarious forums. However, the standards of ferent stages of development, and underAsian hotels under transformation product and service on offer in Singapore pinned by their strategic, competitive and According to Simon Littlewood, President are not as well regarded. In fact, Singapore operational challenges. of ACG Global, rooms in the pipeline in Asia will exceed that of the USA by 2012.

He said that hotels are re-thinking both brand & sales strategies to reflect this new reality, and adopting new sales channels and models above and across property to maximize effectiveness and growth.

Dirk Dumortier, VP GMO of AlcatelLucent Enterprise, discussed how existing players in the market can create differentiation for the user. He said that technology can be seen as one of the ways to differentiate. The best way to do this is to find a balance between the user experience and Tim Charlton, editor-in-chief of Singapore Business Review, provides hotels’ market outlook the operational improvements the solutions will bring and by adding your own, Bronze Sponsor: Media Partner: now famous ‘color’. Mark Greedy, CEO & Co-founder of Elite Resorts of Asia Pacific,

Challenging SG’s hoteliers

T

SINGAPORE BUSINESS REVIEW | OCTOBER 2011 47

LIFE & STYLE

The Prime of Your Life

Concierge expert Quintessentially recommends five of the best places to enjoy beef, however you like it, in Singapore.

From thick-cut juicy steaks, melt-in-the-mouth slow cooked ribs to snowflaked grade A5 Wagyu, unleash your inner carnivore with these suggestions.

Shabu Shabu Gen

www.aoki-restaurant.com.sg We love the delicious marbled Wagyu beef at this tiny Japanese restaurant, which, as the name suggests, specializes in shabu shabu. The meat, which is graded A4 and A5 quality (the best there is), is picture perfect snowflake Wagyu beef and the connoisseur’s choice for the best hotpot in town.

Les Bouchons

7 Ann Siang Road, Singapore This “hole-in-the-wall” French restaurant has a loyal following and is well worth seeking out. For flavourful steak and with an endless supply of frites, this is a hidden gem for all those who like their steaks prepared simply, with just a patty of herb butter to accompany the juicy rib eye.

Pamplemousse Bistro + Bar

www.pamplemousse.com.sg Cordon Bleu trained Adrian Ling is passionate about food and a connoisseur when it comes to beef. Come here for the creative European cuisine (in particular the Wagyu striploin) and lovely environment - a sure fire recipe for a successful restaurant.

Fika Café

www.fikacafe.com This cute Swedish and Halal café doesn’t pretend to be a steakhouse – it’s a small, charming and quaint café. But what it does do well is Swedish Pannbiff (beef patties) with creamy sauce, mashed potato and lingonberry jam, classic Swedish meatballs (of course) and a simple steak with parsley potatoes.

CUT by Wolfgang Puck

www.wolfgangpuck.com Celebrity chef Wolfgang Puck’s first steakhouse in Asia is located at the Marina Bay Sands. Bringing his recipe for success from Hollywood to Singapore, expect classic home-made sauces and fantastic steaks, which are grilled over hard wood and charcoal and then finished under an intense 1,200 degree broiler.

The result? The perfect steak.

48 SINGAPORE HONG KONG BUSINESS BUSINESS REVIEW | APRIL|2011 OCTOBER 2011

Recommended by QUINTESSENTIALLY, the world’s leading luxury lifestyle group with a 24-hour global concierge service. Contact hongkongbusiness@ quintessentially.com.

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Last word EMMA sherrard matthew

Shopping Spree Luxury European brands are building up in Asia’s sleeping giant.

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hina will be the world’s largest luxury market by 2015, and it seems like many European luxury brands will soon need to learn Chinese.

French shoe brands step in China Earlier this year, Li & Fung Trinity’s Fung Capital division announced they had acquired French shoemaker Robert Clergerie. Trinity already owns a stable of stellar European men’s wear brands including the quintessentially British Kent & Curwen and the haute Parisian tailor Cerruti.

We may be used to seeing Asian consumers investing heavily in luxury goods but this is a shopping spree of a much bigger magnitude, and the traffic runs in both directions. And as the Chinese line up to buy Western brands, Western investors are battling to buy stakes in the Chinese companies who sell the brands’ merchandise.

“Chinese millionaires want a big slice of the retail action that’s taking place on their soil,” says Daniel Jeffreys, editor-in-chief of Quintessentially Asia magazine.

One of the biggest moves took place a year ago when New York-based Morgan Stanley Private Equity purchased a USD 42 million stake in Sparkle Roll, the Hong Kong-listed distributor of luxury goods in China.

The company’s Beijing auto-

“Chinese millionaires want a big slice of the retail action that’s taking place on their soil” dealership last year sold 476 RollsRoyces and Bentleys.

The Morgan Stanley fund’s interest in Sparkle Roll was undoubtedly driven by the Chinese company’s integrated approach to the millionaire marketplace.

Sparkle Roll has acquired the 50 SINGAPORE BUSINESS REVIEW | OCTOBER 2011

exclusive rights to four European watch brands operating in China and they are looking to buy into top-class jewellery brands. The company’s chairman, Ivan Tong, says he wants to pool his brands in shopping malls like the Sparkle Roll Luxury World that opened in February in Beijing.

Famous LV brand also in China Brand-pooling is precisely the strategy that luxury retail genius Bernard Arnault, the Chief Executive of Louis Vuitton, has used to build the profile of his brands in China, grouping labels like Louis Vuitton, Dior and Celine within a few steps of each other.

“Chinese entrepreneurs have seen how much money Europeans have made from China and how they have done it,” says Jeffreys. “Arnault’s personal fortune rose by USD 13.5 billion last year, largely because of sales in Asia. If, for now, the Chinese will only buy luxury goods made in the West, that means Chinese billionaires will have to buy the European luxury brands to get their piece of the pie.”

Uprising luxury brands Which can only mean one thing: there will continue to be an unprecedented number of bids for European luxury brands

by Chinese entrepreneurs, and European luxury conglomerates will become even more aggressive in buying up the distributors who sell their brands in China. The price of owning a stake in China’s luxury bonanza can only rise higher.

Emma Sherrard Matthew is the CEO of Quintessentially, the world’s leading luxury lifestyle group with a global concierge service. For more information visit www. quintessentially.com, call +852 2540 8595 or email hongkongbusiness@ quintessentially.com.