Singapore Business Review Aug-Sep 2012

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STAGFLATION STALKS SINGAPORE

CAPITALAND SPLURGES $359 ON SOMERSET

RICHARD BRANSON:

HOW TO EXCEED

EXPECTATIONS CEO INTERVIEW WITH StarHub

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

SINGAPORE BUSINESS REVIEW | AUGUST 2012 1

2 SINGAPORE BUSINESS REVIEW | AUGUST 2012

FROM THE EDITOR The Singapore Business Review team has been very busy on the website and you may have noticed the improved flow of daily news stories and opinion pieces.

We are very pleased to announce that the website sbr.com.sg just passed through 120,000 absolute unique visitors in July, which is doubled from just 6 months ago. Sbr.com.sg remains proudly paywall free and is fast becoming one of the first choices for people to get their daily dose of news on Singapore.

This print issue of Singapore Business Review Magazine also sees the print run increase from 16,000 to 25,000, a significant increase in the circulation base in our effort to reach even more readers.

Combined, the Singapore Business Review web and print platform reach over 200,000 business people in Singapore with each issue, a very significant readership. Perhaps you are one of our new readers with this issue - if so we would love to hear what you have to say.

There will also be some new big changes from the next issue as we have created the research department to delve deeper and create lists of Singapore’s biggest companies in different industries. This has not been done before and we are starting with the largest 25 accounting firms, followed by the 25 largest law firms. More rankings will also be on their way, and if you have an industry you think is worth ranking also let us know and perhaps our researcher can get cracking on that.

I trust you enjoy this issue.

Tim Charlton Singapore Business Review is available at the airport lounges or onboard the following airlines:

Singapore Business Review is available at the following clubs and hotels: American Club Hollandse Club Laguna National Orchid Country Club Raffles Country Club Raffles Town Club RSYC Seletar Club Sentosa Golf Club Singapore Cricket Club Singapore Island Country Club Swiss Club The Tanglin Club The China Club The Legends Fort Canning Park The Pines Club Tower Club Singapore Fullerton Hotel Grand Plaza Park

Royal Hotel Inter-Continental Le Meridien Orchard New Park Hotel Pan Pacific Raffles Hotel The Hilton The Regent Singapore The Ritz Carlton The Swiss Hotel Stamford Traders Hotel Singapore Darby Park And to 16 serviced residences

SINGAPORE BUSINESS REVIEW | AUGUST 2012 3

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SINGAPORE BUSINESS REVIEW | AUGUST 2012 5

CONTENTS

11 FIRST STAGFLATION STALKS SINGAPORE

12

FIRST 10 Home prices sticky even as buyers

38 ANALYSIS IS FOOD INFLATION A BOON OR

FIRST CASINOS MAKE FOR GOOD MOATS

walk away

11 Stagflation stalks Singapore 12 Casinos make for good moats

REGULAR 18 CEO Interview 24 Legal Briefing 46 Dining 48 Life & Style

BURDEN TO RURAL ASIA?

OPINION

ANALYSIS

17 How to exceed expectations 28 Words to make you sound smarter

26 All you need to know about

Is the world’s third-largest economy in jeopardy because of the country’s shadow banking system? By Matthew Boesler

32 The coming American diaspora 36 The appeal of uniforms 42 3 mindsets Singaporean employers must change

China’s fragile $2.2 trillion shadow banking system

38 Is food inflation a boon or

burden to rural Asia?

Economists debate whether rampant food inflation will raise living conditions in the region’s countrysides.

50 Numbers

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road 6 SINGAPORE BUSINESS REVIEW | AUGUST 2012

For the latest business news from Singapore visit the website

www.sbr.com.sg

SINGAPORE BUSINESS REVIEW | AUGUST 2012 7

News from sbr.com.sg Daily news from Singapore Who’s banned from casinos?

MOST READ TELECOM & INTERNET

Singaporeans no longer obsessed with iPhone 70% of M1’s new customers in 2Q12 chose Androids.

Telcos provide lower handset subsidy on Androids versus iPhones due to the cheaper retail price of Androids. According to DBS Group Research, this is likely to benefit SingTel and StarHub. PROFESSIONAL SERVICES

Singapore ranks second in financial literacy list Guess who beat Singapore by merely 2 points.

In a release by MasterCard, Taiwan and New Zealand tied for first place in the MasterCard Worldwide Index of Financial Literacy, with a score of 73 index points each, with Taiwan jumping up from 5th rank in 2010. Following close behind with 71 index points each are Hong Kong, Australia and Singapore.

in 1H/2012, a record high since 1995.

This was largely driven by sales in the primary market making up 72% of all transactions.

The average transacted unit price of $2,129psf in 1H/201 was a 56% increase from 1H/2011.

RETAIL

Retail sector suffers from cash-strapped shoppers Sales dipped 2.2% in May as consumers refrained from buying

COMMERCIAL PROPERTY

Strata office sales smash 1995 record The average transacted unit price was a 56% increase from 1H/2011.

In a release by Knight Frank, a total of 632 strata offices have been transacted 8 SINGAPORE BUSINESS REVIEW | AUGUST 2012

luxury items.

According to OCBC, the pullback in retail sales continued in May with overall retail sales volume falling 2.2% MoM. Similarly, retail sales value declined 2.7% MoM and 3.3% MoM when motor vehicles were excluded.

ECONOMY

3 in 10 Singaporeans worry that Singapore is in recession And 46% say their finances will be hurt

in the next 12 months.

According to a survey by Nielsen, In the second quarter of 2012, consumers in Singapore showed lower confidence levels in the economy, with 31 percent indicating they believe the country is in recession, up 4 percentage points from Q1 2012.

LEISURE & ENTERTAINMENT

More than 100k Singaporeans banned from entering casinos Regulatory constraints dominate over the upcoming renewal of the two casino gaming licenses in 1H 2013.

According to Nomura, the outlook for 2H 2012 could be constrained by slower growth prospects from both the VIP and the mass market segments.

RESIDENTIAL PROPERTY

UOL profit crashes 19% to S$171.7m Blame it on lower income from property development and expensive marketing.

According to OCBC, UOL’s 2Q12 PATMI came in at S$171.7m, down 19% YoY mostly due to lower income from property development and higher marketing expenses.

TRANSPORT & LOGISTICS

SBS Transit profit down 53.4% to $4.6m Net income from investments of $0.1m for 2Q12 was 17.9% lower than 2Q11.

SBS Transit reported that Group revenue of $196.2m for 2Q12 increased by 5.7% or $10.5m from $185.7m in 2Q11 while Group operating expenses of $190.5m increased by 9.8% or $17.0m from $173.5m in 2Q11.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 9

FIRST units were launched but unsold in 2Q 2012, up 12.3% from 1Q 2012. “This is the highest recorded since URA figures were made publicly available in 1999, as the market starts to feel the effects of the many government land sites sold in the last 12 to 18 months,” noted Ms Tay. Of course, property investors will need good tenants, and in that respect the news is encouraging. Leasing of apartments and units also reached a record high of 12,276 since numbers were first recorded in 2000, up 12% over the quarter. Most of this is presumed to be from expatriates and foreign workers being moved to Singapore. A fast growing segment of the rental is shoe-box apartments, which has seen rest of central region rents starting to close in on core central r rents. Alan Cheong, an analyst at Savills, noted this could be due to the completion of shoe-box units at the fringe which appeal to expatriates with limited rental and travel allowance. “Arising from their more constrained rental allowance, smaller non-landed homes have become popular. Therefore, although absolute rental paid may have fallen, the rent per sq ft is still rising and in 2Q2012 median rents for non-landed properties hit a record,” he said.

Sales volume will decline moderately from the 11,827 units recorded for 1H 2012 to between 8,000 to 10,000 units for 2H 2012

Home prices sticky even as buyers walk away

Record unit sales Despite all the potential head-winds, it has been a good first six months for Singapore’s developers who sold a record 12,098 units, the highest ever half-year sales volume. Prices remain sticky and as yet there is no sign of a decline. URA residential flash estimates showed prices rose 0.4% qoq in 2Q12, led by new sales, though they “may not have fully incorporated the discounts developers have been offering in prime/luxury, but the resale market remained its 10 SINGAPORE BUSINESS REVIEW | AUGUST 2012

Looming headwinds The real challenge to property sales could come in the second half of this year, with the government land sales program expected to yield about 7,100 homes, including 3,100 Executive Condominium units, from the Confirmed List. Tay Huey Ying, an analyst with Colliers International, reckons sales volume will decline moderately from the 11,827 units recorded for 1H 2012 to between 8,000 to 10,000 units for 2H 2012.

Another headwind could be the rising number of launched but unsold units, which has reached a record.

The URA statistics showed that 6,762

Sub rental index for different market segments CCR RCR OCR

200 180 160 140 120 100 80 60 40 20 0

Q1/2004 Q2/2004 Q3/2004 Q4/2004 Q1/2005 Q2/2005 Q3/2005 Q4/2005 Q1/2006 Q2/2006 Q3/2006 Q4/2006 Q1/2007 Q2/2007 Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012

same shade of grey. While low interest rates and “asset allocation” trends into hard assets remain key support functions, we maintain our view that home prices will grind lower, -3%/-5% in ‘12/13, as demand is unlikely to keep pace with the supply build-out (continued weakness in Rents is a concern),” noted Mr Lian. Prime sales remain a particular soft spot, partially because more of the potential buyers are foreigners who are deterred by the prospect of paying the additional stamp duty.

Non Permanent Resident foreign buyers now account for just 7% of total sales compared to 20% in the fourth quarter of 2011. Some notable sales include 1919 at Sophia Road which sold 74 units at S$2,042psf, and Scotts Square which continues to sell around S$4,803psf level.

Source: URA, Savills Research & Consultancy

Median rents for non-landed homes S$psf pm 4 3.5 3 2.5 2 1.5 1 0.5 0

Q1/2007 Q2/2007 Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012

W

hether it is buyer’s remorse or just a lack of financing, a larger number of buyers of property than usual are walking away from their options to purchase and losing their deposits. This, as prices remain high and unmoving, and overall volume is down. Rather than the posh end of town, it is would be purchasers of mass residential projects who are signing an option then walking away. In June 111 units had an option lapse, which was down from 185 in May, but that is still a lot of money left on the table. Of the 111 units in June, 78 units were in Mass, mainly Tampines Trilliant (10 units) and Twin Waterfalls (10 units).

Of note, the much talked about Sky Habitat which set record prices in Bishan saw another 6 units lapse (10 units in May), with total sales now 125 units, below 131 units at launch in April, notes Goldman Sachs analyst Paul Lian.

Source: URA, Savills Research & Consultancy

FIRST years where GDP has grown slower than inflation. But this is now the new normal in Singapore, with four out of the last 5 years experiencing stagflation.

The problem is that much of the inflation is not imported through things like food prices, but created domestically through increased costs of rents, COE’s for cars, and labour which is passed on. Seah reckons that against this background, there is scope for the MAS to shift to a more accommodative monetary stance when it meets in October.

Singapore will be home to one of the highest inflation rates in South East Asia.

Growth below inflation

Stagflation stalks Singapore

S

tagflation was one of those hybrid horror words from the 1970’s that conjures up images of bell-bottomed, denim jean-wearing, unemployed Europeans waiting at the dole queue amidst an economic slump, urban decay, and runaway inflation. It is hardly a word one would normally associate with Singapore, yet that is exactly the risk the economy faces, warns DBS economist Irvin Seah, who says that growth is slowing and inflation remains persistently high. “This year is turning out to be a tough one. In contrast to previous years, Singapore will be home to the weakest growth and one of the highest inflation rates in South East Asia.”

Part of the problem stems

from the move to restructure the economy from its reliance on foreign labour. “Efforts to tighten foreign labour policies in a bid to improve overall productivity will naturally slow economic activities and stoke inflation, unless productivity can be raised quickly. In reality this takes time, and in the near term the impact is higher labour costs, compression of profit margins and the tendency for companies to pass on this higher cost to consumers,” noted Seah.

Apart from Vietnam, Singapore has the highest inflation rate in South East Asia. 2012 will go down in the books as a year of slow growth and high inflation, and there have only been a few occasions in the last 30

Source: DBS Group Research

High domestic inflationary pressure

Source: DBS Group Research

FOOD INFLATION – FEAST AND FAMINE 22% but in China favourable weather coditions are proving a good harvest.

Woodbridge says that US agricultural prices are on course to increase a whopping 25% m/m in July due to a severe drought, which translates into about a 6% y/y gain. “If US agricultural prices stop rising sequentially, they should finish the year up 20% y/y. By itself that doesn’t justify panicking over Asian food.”

as local agricultural production can be sustained and that in turn depends mainly on the weather – something nobody seems very good at predicting, he adds.

Monthly US agricultural prices and Asian food inflation Chart 1: Monthly US agricultural prices and Asian food inflation 80%

%y/y

60%

40%

20%

0%

-20%

Jul-11

Jul-12

Jan-12

Jul-10

Jan-11

Jul-09

Jan-10

Jul-08

Jan-09

Jul-07

Jan-08

Jul-06

Jan-07

Jul-05

Jan-06

Jul-04

Jan-05

Jul-03

Jul-02

Jan-04

Asia (ex. Japan): Food CPI S&P GSCI Agricultural Commodities Index

-40% Jan-03

Inflation based on the traditional relationship with US agriculture Recent US agricultural price increases are a negative for Asian food inflation, but not necessarily disastrous as long

Jan-02

If commodities were truly transportable globally, one would expect that prices would also be similar across the world. But in the case of many food items, that has not been the case, notes Duncan Woodbridge, an economist with UBS, who adds that there have been many times over the last decade where US agricultural prices and Asian food inflation have de-coupled. The main reason is changing weather patterns which may give Asia a bumper crop and the US a poor one, or visa-versa.

This year in Asia, India is having a bad year with production down

CEIC, Haver, UBS estimates. Note: July is based on prices as of July 17th Source:Source: CEIC, Haver, UBS estimates.

Note: July based on prices as of July 17th

SINGAPORE BUSINESS REVIEW | AUGUST 2012 11

FIRST did mention that overall industry growth is likely to slow on a yoy basis, mainly due to a high base as well as concerns over China’s slowing economy,” said Ting. While credit facilities were non-existent during the global financial crisis, both junkets and casinos are now in a stronger position to lend as balance sheets and cashflows are stronger than they were during 2008-09. “Consequently, we are hearing that junket operators have access to plenty of credit but are being more cautious on who they lend to, especially when it comes to new players. On the demand side, we gather from the gaming operators that VIP players seem to be more cautious in their spending.

We have not heard of any instances of the inability by casinos or junket operators to collect debt,” he added.

Industry dividend payout to increase from US$2.9bn in 2011 to US$3.4bn in 2013

Casinos make for good moats

O

n a recent trip to Europe to meet with investors, Hong Kong brokerage CLSA asked the beleaguered Europeans what they were looking for in Asian investments.

The answer, perhaps not surprisingly, was companies that are immune from any slowdown, or in the words of the analysts, “moats”. To meet the definition of a moat, a company must generate visible, consistent cash flow growth and score well on corporate governance. And perhaps the best such moat in a volatile world and a slowing China is Macau gaming, which continues to thrive even as the general economy slows.

Macau’s investment appeal “We recommend investors to track the weekly gaming revenue data, which we believe to be the most reliable yardstick, and it has thus far not indicated a collapse in Macau VIP gaming revenues,” noted CLSA analyst Aaron Fischer.

“We encourage investors to own the sector for dividend yield, which is the highest in Asia and still growing.

In nearly every meeting, investors asked about Macau,” he added.

Of the investors that the CLSA team met, most still own Macau for growth. But for the first time during a roadshow, they had heard 3 to 4 investors saying that they own Macau names in their firm’s dividend funds. “We also meet a few dividend only portfolio managers, which is also encouraging. Over the past two years, we have also been noticing consistently inflows into global dividend equity funds.”

12 SINGAPORE BUSINESS REVIEW | AUGUST 2012

Competition looms But is there room for Macau to keep growing profits and dividends, especially with new competition coming from the Cotai strip?

According to Fischer, not only is the dividend sustainable but it is also likely to grow over time, underpinned by the growing free cash flow. “We estimate industry dividend payout to increase from US$2.9bn in 2011 to US$3.4bn in 2013, representing 9% Cagr and 6-7% 2013 dividend yield for Wynn, Sands, MGM and SJM. The strong dividend payout will also rank Macau gaming as the sector with the highest dividend yield.” Fitch, a ratings agency, is more sanguine on Macau, noting that whilst the market is up 20% year on year, there were noticeable slowdowns in May when revenues grew only 7.3%, followed by 12.2% in June. “Junket operators might find it increasingly challenging to access credit as conditions tighten in China, but this has not proved a problem for larger junket operators yet,” added the agency.

Still packed – for now Michael Ting, an analyst with CIMB, reckons that the mass market is not seeing any significant slowdown in growth and his recent trips to Macau showed that the mass areas in both the Peninsular and Cotai casinos were almost at full capacity. “Gaming operators also said that they are still seeing strong volumes in the mass market and are guiding mass GGR growth of around 25% for 2012.

On the VIP side, gaming operators

More than casinos?

But there will be some hurdles ahead as competition from Singapore and other regional casinos looms and Macau has not diversified its offering. Fischer reckons the government may require more non-gaming investment and it may be that the government is taking a much closer look at the non-gaming attractions for the next round of Cotai properties. “We hope that the government commands a much improved offering from each of the operators. Quite frankly, the government has been too lenient on the license holders since deregulation with some companies, like Wynn, barely spending anything on non-gaming attractions.” The Macau government should have adopted an approach more similar to the Singapore government which requires billions of USD spent on theme parks, museums, convention facilities, and iconic developments, he adds.

Macau: 2013 dividend and free cashflow yield Macau: 2013 dividend and free cashflow yield Figure 3

14 (%)

FCF yield

12.4

Dividend yield

12

8 6

10.0

10.0

10

6.7 5.8

7.1

7.1

6.1

5.0

4

2.9

2 0

-

Galaxy

-

Melco Crown

Source: CLSA Asia-Pacific Markets

Source:CLSA Asia-Pacific Markets

Wynn Macau

Sands China

MGM China

SJM

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ABACUS

Veering toward expansion

Somerset to be redeveloped

CapitaLand splurges $359 on Somerset CapitaLand will acquire Somerset Grand Cairnhill and redevelop it into serviced and high-end residences.

C

apitaLand has announced a bundled deal with Ascott Residence Trust to sell two mature assets into the REIT and acquire an underutilized plot at Cairnhill in return.

CapitaLand intends to sell Ascott Raffles Place for S$220m and Ascott Guangzhou for S$63.3m. In return, CapitaLand will acquire Somerset Grand Cairnhill from ART for S$359m, notes CIMB analyst Donald Chua. “The about-466k sqf GFA site will be redeveloped into an integrated development comprising 40% serviced residences (SR) with a hotel license and 60% high-end residential units. The deal contains a put clause which will see the SR portion sold back to ART in 2017 for S$405m after it is redeveloped.”

OCBC analyst Eli Lee projects the residential component (200250 units) to be launched in 1Q13 at S$2.8k psf, based on latest transactions from Urban Suites. This being so, they estimate a gross profit margin of 32% and a net present value accretion of S$150m (S$0.03 per share) to RNAV for this project.

Chua deems the transaction mutually beneficial to both companies: ART will reap development profits as Cairnhill plots get bumped up from about 330k sqf to about 466k sqf something it is unable to do due to development restrictions on REITs. “Factoring in about S$170m to top up the Cairnhill lease to 99 years, we estimate that the residential portion will break even at about S$1,800 psf, which compares well to the current selling price of over S$2,400 psf for neighbouring units,” added Chua. CapitaLand is expected to see S$98.9m in net profit on the divestments, which excludes potential development upside from the eventual sale of the redeveloped SR portion of Cairnhill Somerset back to ART in 2017.

Keppel mulls expanding offshore capabilities Keppel Corp recently invested US$115m to buy a 20% stake in KrisEnergy, an independent upstream oil and gas company with a strong portfolio in Southeast Asia, and analysts see possibilities 14 SINGAPORE BUSINESS REVIEW | AUGUST 2012

of Keppel executing an IPO for the latter. KrisEnergy is the operator for six out of the 14 licences it holds in Cambodia, Indonesia, Thailand and Vietnam and its three producing fields produced an average of 4,800 barrels of oil per equivalent day in 2011, according to Nomura analyst Lisa Lee. Though EPS contribution will not materialize soon, CIMB analyst Lim Siew Khee is positive of the acquisition despite KrisEnergy’s US$36m loss in FY11. “Judging from Pearl Energy’s success by the same group of founders, we are more interested in a potential IPO for KrisEnergy,” noted Lim. OCBC analyst Low Pei Han also sees a possibility of an IPO for KrisEnergy. “With this latest development, KEP has regained direct exposure to oil and gas exploration and production (E&P) activity.

Given the capital-intensive nature of E&P companies, we think there may be a possibility of KEL executing an IPO down the road,” Low added.

According to Lim, there are also prospective alliances between KrisEnergy and KEP’s O&M division for the supply of offshore equipment.

Indeed, Keppel seems to be laying down plans to tap the offshore market. Recall that in January this year, Keppel also announced the acquisition of 49.9% of OWEC Tower’s stake for about S$61m. OWEC Tower is the only company with a track record of having its jacket foundation design installed for offshore wind

STE’s proposal ditched

farms, notes Low. “This move enables KEP to tap on OWEC’s expertise to develop its business in the design and construction of offshore wind turbine foundations as well as installation and support vessels,” he added.

Though offshore wind farms are a relatively new frontier for some countries, OCBC appreciates KEP’s steady efforts to build up its capabilities to service the offshore wind industry which also has synergies with the offshore oil and gas sector.

ST Engineering ditched by Nera Telecommunications Nera stockholders voted against STE’s proposed acquisition of the firm.

But CIMB analyst Lim Siew Khee was not disappointed with Nera’s decision. “Firstly, we estimate that the deal would have only contributed 2% to STE’s earnings.

Secondly, we believe there are other M&A targets in Asia,” said Lim. Though Nera disclosed no reason for turning down the acquisition, CIMB suspects Nera’s remaining shareholders are hopeful of striking a higher offer price.

“The acquisition was first announced on 10 Feb 12, when STE said that its subsidiary, ST Electronics, had received an irrevocable undertaking from Nera’s controlling shareholder, Eltek ASA (50.5%), in favour of the transaction. The offer price then was S$0.45/share (S$0.39 cash and S$0.06 dividend), amounting to S$141m,” noted Lim.

CO-PUBLISHED CORPORATE PROFILE

Go west… but get the complete picture first

Amid Western Europe’s financial crisis, credit insurers like Atradius protect you against financial risks and help your business grow.

P

ick up a newspaper, watch televised business reviews or check online newswires and you’ll see a similar story: Western Europe is battling an epidemic of diminishing business and consumer confidence, falling demand and spiralling debt. While much of this is true, the dramatic presentation of events by the media to attract an audience can magnify their effect and contribute to the situation by further depressing both business and consumer confidence.

The whole picture News presentations are not the only influence of market sentiment. Markets also rely heavily, and rightly, on the judgement of professional economists, although, of late, they too can tend towards a pessimistic view. How often has a conference speaker begun their speech with the cliche that economists have predicted nine out of the last five recessions? Like many clichés, this statement contains an element of truth and while consensus among economists is a rare thing, pessimism about the global economy has become a safe path to tread in the face of the global economic indicators.

While optimism is what is needed - Keynes wrote of the “animal spirits” that can affect economic activity - it can be hard to find many positives in the current macro world of economists’ analysis. But what is the view of those operating at the “coal-face” of business trade? What is being experienced by finance managers, purchasing managers and sales people on the ground in Western Europe?

Using actual experience in your assessment At Atradius, while we place a high value on the macro-analysis and forecasts of our economic experts, we also seek a comprehensive picture of the global marketplace. We seek first-hand knowledge from those at the very forefront of national and international trade and we factor their experience into our trade risk assessment.

The Atradius Payment Practices Barometer, a survey of business of all kinds across the world, asks those who are actively participating in global markets of commerce and trade for their views and experiences. We ask questions

regarding their business-to-business payment experience. Are their customers paying on time, late, or not at all? What steps are they taking to keep their cash flow healthy, encourage early payment and avoid bad debts?

Atradius’ latest Payment Practices Barometer surveys business experience in Western Europe, and it serves as a useful guide to any business in Singapore that is already trading in Europe, or has an eye on Western European countries as a potential market. It can help you avoid making strategic sales decisions, based solely on what you’ve gleaned from the media or economic research houses, and the information contained in the report is coupled with Atradius’ unique analysis.

Take the survey responses to the question ‘What percentage of the total value of your B2B invoices are overdue?’ As could be expected, three Eurozone countries presently struggling to mend the economic damage of the debt crisis are Greece, Italy and Ireland – report a sizeable volume of late payments from their domestic customers, as high as 41% in Greece.

Surprisingly, the German survey respondents also report a considerable level of late payments from their domestic customers with results at 31%. While over half of Germany’s late payments are settled within 15 days of their due date, that still leaves numerous debts outstanding with a notable portion paying over 90 days late.

Most of the surveyed companies in Germany, Austria, Sweden, Great Britain, The Netherlands, Denmark, and Switzerland, keep a tight rein on their exposure to the risks of non-payment by restricting contractual payment terms to no more than 30 days credit. Potential suppliers from Singapore may therefore consider this to be an acceptable norm for sales to these countries. Terms of payments are, however, a matter for agreement between the contractual parties and can provide a point of difference in a competitive market where working capital and

Michael Frigo, Atradius Country Manager – Singapore cashflow is provided at a premium.

Many of the businesses surveyed by Atradius, while acknowledging that financial trading risks may not lessen over the rest of 2012, saw them bottoming out. Notably, over 72% of Dutch and 78% of Danish respondents believe that the risks will remain unchanged or decrease, while the same goes for 84% of Turkish and Swedish respondents. In addition to a difference at the country level across Western Europe, we also see variation when analysed by trade sector and note that wholesalers and retailers were the most pessimistic about their short-term trade credit risks.

Charging it to experience However the economic performance of Western Europe develops, credit insurance provides vital protection against unforeseeable financial risks and enables businesses to expand into new markets or grow existing customer relationships. Credit insurers can help you realise the potential in your customers and highlight the most worthwhile sales prospects by assessing the creditworthiness of your prospective commercial customers and supporting that assesment with an insurance policy against their insolvency or protracted default of payment.

You can download Atradius’ detailed Payment Practices Barometer from www. atradius.sg

Atradius Credit Insurance NV (Singapore) #31-02, AXA Tower, 8 Shenton Way Singapore 068811 Tel: +65 - 6372 5316 Email: Michael.Frigo@atradius.com

“Over 72% of Dutch and 78% of Danish respondents believe that the risks will remain unchanged or decrease” SINGAPORE BUSINESS REVIEW | AUGUST 2012 15

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OPINION

RICHARD BRANSON How to exceed expectations

Q

“Doing things better doesn’t have to cost more – all it takes is a little creativity and attention to hiring, training and management.”

: How does Virgin manage to deliver impeccable customer service that at times seems to be above and beyond the norm while keeping prices competitive? And why is it that so many other businesses only seem to be able to deliver either low prices with no service, or high prices for good service?

— Ryan Morphett, Entrepreneur magazine A: When you are making a decision about how best to serve your customers, your own experience is often a better guide than a more sophisticated analysis of the market. I find that I am often more disappointed by expensive goods and services than I am by lower-priced ones because my expectations are often over-inflated when I pay a high price, but I have few expectations when I pay a low price. If a top-of-the-line product or service doesn’t work as I had hoped, I might think: “At that price I really expected something better.” But if something is disappointing at the other end of the scale, I’m likely to think: “I’ve only got myself to blame,” and “Oh well, I guess you get what you pay for!”

A question that often appears on customer surveys is: “Did we meet your expectations?” If the response is in the affirmative, the company may conclude that they must have done a good job – which may not necessarily be the case.

Consider a situation where a customer who has had a bad prior experience comes in

with very low expectations.

When a client anticipates that service will be lousy and that’s precisely what they get, then technically their expectations have been met!

Realistic expectations The key is to set realistic customer expectations, and then not to just meet them, but to exceed them – preferably in unexpected and helpful ways. Setting customer expectations at a level that is aligned with consistently deliverable levels of customer service requires that your whole staff, from product development to marketing, works in harmony with your brand image.

Because when there is no alignment, chaos can ensue.

In commercial aviation, the big, long-established carriers, often still referred to as “full-service” airlines, set themselves up for failure by continuing to oversell their services, even though they ceased to provide great service long ago. Their passengers have higher expectations than when they pay an identical fare for the same trip on a low-cost carrier.

Meanwhile, the lowcost carriers have done a very good job of setting expectations as they reinvent short-haul flying. Ryanair CEO Michael O’Leary and his team are unapologetic about their decision not to provide a great many traditional perks. What their customers do get in exchange for consistently low fares is flights on clean, well-maintained aircraft that usually leave on time.

Virgin America’s model At Virgin America, we try for a different model. We offer great value, providing clean, stylish, comfortable planes for our passengers; in terms of service, we try to surpass travelers’ expectations by offering better entertainment, good food and more comfortable seats. For the last five years the airline has consistently won customer service awards.

Pricing your product or service is only one way to exceed expectations, however. The other is through your front-line employees – everyone who works with customers.

Surpassing expectations on the service side means that your people understand what your brand stands for, that they are proud of it and will go the extra mile to make sure that your customers are happy.

Call for creativity Doing things better doesn’t have to cost more – all it takes is a little creativity and attention to hiring, training and management. To achieve consistently terrific customer service, you must hire wonderful people who believe in your company’s goals, habitually do better than the norm and who will love their jobs; make sure that their ideas and opinions are heard and respected; then give them the freedom to help and solve problems for your customers. You should ask them to treat the customer as they themselves would like to be treated – which is surely the highest standard!

SINGAPORE BUSINESS REVIEW | AUGUST 2012 17

Neil Montefiore, CEO of Starhub

18 SINGAPORE BUSINESS REVIEW | AUGUST 2012

CEO INTERVIEW

StarHub to ramp up NGNBN connections in 2013 CEO Neil Montefiore discusses StarHub’s growth plans, competitive strategies, and progress in rolling out its next generation network service.

SBR: It has been two and a half years since you came over from M1. When you arrived at StarHub, what challenges did you face and how did you overcome that?

Neil: Technical challenges included upgrading to a new operations support systems and business support systems to cover all services provided, and that meant we could start to integrate the company even more, because StarHub came from three different companies that were merged. The other challenge was we wanted to streamline the business into consumer and enterprise, which is already being done. So we now run two separate units dealing with the consumer market and the enterprise market. Another challenge was the NGNBN which was launched about two years ago. Recently, IDA has implemented some new regulations on OpenNet, and we believe the quality should go up and do a lot better particularly on the enterprise side.

SBR: Let’s talk about the next generation network, how is that going?

Neil: People do not see at the moment the advancement and the increase in the speed on the NGNBN. If they are a StarHub customer, they can go to 100mbps on our cable broadband service. So they are not seeing the clear advantage of going up any higher than that for now. But the fibre broadband

“We are ahead in how we protect our mobile and broadband customers from being attacked by other Internet users… Penetration in Singapore is around 150% now.” business is growing and it is going faster. We still see there is a little bit of reluctance in consumers to switch from cable to fibre. The problem on the enterprise side that we are currently resolving is that people do not want to pay again to have the fibre run through their buildings. The IDA has now changed the interconnect arrangements and the weekly installation quota will go up and we will have a separate quota for the enterprise side.

SBR: Now postpaid subscriber growth has been flat for the last year. What is being done to address this particular segment of your business?

Neil: The growth in the mobile postpaid business is very flat because mobile penetration in Singapore is around 150% now. So there is not going to be much growth. But the growth is coming from people using more than one device, so we will continue to drive that and encourage people to do that. And after that, it’s just tracing market share.

SBR: Tell me where you think StarHub is with your technological offerings compared to what else is in the market,

where you are ahead or where you have room to work on.

Neil: We are ahead in how we protect our mobile and broadband customers from being attacked by other Internet users. We are quite advanced in that area. We are also doing well in automating customer service. We’re not really behind in any area. We’re slightly slower than the other two telcos in the deployment of the next generation mobile network (LTE) but that will not be a big issue. We will be launching our LTE service by the end of the year and by then we will have more choices of LTE devices for customers.

SBR: What do you think are the future emerging trends in Singapore’s telco industry, and how can StarHub be a part of that?

Neil: We will differentiate ourselves by providing all our content across all devices. We are by far the leader at the moment in content, so that’s one area we are going to push forward.

Our new TV Anywhere service has been quite important to us because people are now consuming more and more content on their mobile. I think the issue in that area is that there is quite a lot of illegal content being available to people. We need to implement some controls that can slow that down because it is getting quite rampant. On the enterprise side, I think it is just getting the NGNBN access to the buildings where at the moment there is no real competition.

SBR: How did you think the preference of Singaporeans have changed with how they consume telecom with all the highspeed internet that they use?

Neil: Two things happened. More people wanted higher speeds and they wanted to get access to the content they want, and the applications they want on all their devices. I think there will be some drive from that area. And from the enterprise side it came from direct competition.

Moreover, Singapore now has the highest Facebook penetration in the world. The average user logging on to Facebook is now 36 minutes in Singapore compared to 28 minutes in the US. People have changed the way they communicate. They are no longer texting or calling each other frequently. They communicate more through social networking services.

SBR: When you were CEO of M1 and Vodafone was your partner, and now you brought that relationship over to StarHub, what benefits does being a Vodafone partner bring to StarHub and your customers?

Neil: It’s very important because Vodafone Global Enterprise has a global presence. This opens doors for us to the European big multinationals in Singapore, so that is a big advantage. We also have access to their knowledge bank. That is very useful to us because they have operations in many countries and it does help us to bring down the roaming charges in countries with a Vodafone network.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 19

GAME CHANGERS

Back up your data with Dropmyemail

John Fearon, CEO, Dropmyemail

E-mail backup service gets ambitious Singapore startup Dropmyemail provides automatic e-mail backups in the cloud.

I

n 2011, Internet entrepreneur John Fearon founded Dropymyemail, a cloud-based solution that lets you backup your e-mails automatically. With over 540m e-mail accounts getting hacked annually, Dropmyemail aims to deliver its products to this underserved need. It has since signed up 635,000 users and is on track to hit one million users soon.

SBR: Please give us a brief outline of how Dropmyemail started. How did your ideas develop into an actual business?

Our ideas all started as a minimum viable product to deliver to an important and underserved need.

We started backing up websites with Dropmysite because our previous website crashed. We lost important client data and there wasn’t a suitable easy-to-use website backup service, so we created our own. Next, when Dropmysite started taking off, a client asked if we can back up e-mails as well - so we created Dropmyemail to serve that need.

Backing up e-mail is applicable to everyone as there are four billion e-mail accounts and 540 million e-mail accounts get hacked annually. We saw the lack in the market, so we worked to secure everyone’s e-mail.

SBR: What new ideas/services are you bringing to the table?

E-mail users are afraid of the consequences of losing their e-mail messages, being hacked, or having to move accounts.

Dropmyemail solves this problem by providing e-mail users a peace of mind. Dropmyemail is a cloud-based solution, accessible by desktop and mobile, that backs up and keeps people’s e-mail boxes safe. Think of it as insurance for e-mails, but without the complications. If anything happens to a user’s e-mail message or account, they can use Dropmyemail to view their backed up e-mails, and to even restore and migrate e-mails to a new account.

20 SINGAPORE BUSINESS REVIEW | AUGUST 2012

SBR: How do you actually back up an e-mail address?

It is a simple two-click sign-up process to get going. First, users sign up and can even do so with their Facebook, Twitter or Google accounts. Second, users enter the details of their e-mail account/s and it is done. The e-mail will be backed up automatically on a daily basis. Technically we use standard protocols such as IMAP and POP3 to access the e-mails and back up the data.

SBR: Can you tell us more about your current traction?

After a few whirlwind months since the launch of Dropmyemail at DEMO Asia ’12 (where we won the ‘DemoGuru’ and ‘Freedom’ award), the company is currently boasting 635,000 users.

Hailed as the current fastest-growing startup in Asia by e27, we released our viral bonuses plan that will attract more users and reward them with more free storage space. We are on track to hit one million users shortly.

SBR: In an increasingly crowded and competitive online space, what challenges do you foresee?

We will start seeing more new competitors and existing players launching more services which will start adding more noise into the market.

We are the recognised first mover in a large market with the potential to scale fast. Deep expertise in online performance marketing, including Display, SEO, SEM and Social is coupled with a strong technical team, with an aggregated coding experience of more than 40 years. Our staff have worked in senior positions for Google, Yahoo, Dell, AsiaRooms and more.

We plan to do what we are good at, that is, to not get distracted. We will focus on developing great products that serve the specific needs of the users in the cloud.

SBR: Your ultimate goal is to ‘back up the internet.’ Where are you now in terms of achieving this goal?

We are still in the very early stage of our development and believe that we have a long road ahead of us. We believe we have had a good early start to our business and will try our best to push home this advantage.

SBR: How do you see Dropmyemail five years from now? Any expansion plans?

We plan to offer more services around backing up videos, pictures as well as social media. In addition we plan to make the data that we back up easy to access and use. This will be done on mobile and web platforms.

THOUGHT LEADERSHIP SERIES 2: EDUCATION

East Asia Institute of Management educates with excellence

Felinka Zhou Fan, property sales manager at Far East Organisation

EASB equips its students not just with academic excellence but also with various enrichment programmes to produce career-ready graduates.

W

hile having an MBA degree does not guarantee a great career in itself, the East Asia Institute of Management (EASB) ensures each student gets equipped with holistic knowledge and skills that lead not only to academic excellence but to complete competence.

Holistic education at EASB Felinka Zhou Fan, a property sales manager at Far East Organisation, finished her MBA at EASB - Cardiff Metropolitan University (Cardiff Met) in 2008. “I am one of the many who went through the complete EASB pathway. I started with a Certificate in Business English and progressed through to Advanced Diploma and Bachelor’s, before my MBA. It took me around 4 years. The transition was especially smooth for a then-foreigner like myself,” says Zhou Fan. Apart from the exceptional academic equipping, Zhou Fan has been trained to think outside the box and have a long-term perspective for business development throughout her stay at EASB. “As property sales manager, my training at EASB helped me create and develop my prospects pipeline and build good relationship with buyers and business partners,” she says.

Zhou Fan notes that the EASB-Cardiff Met MBA provides students with current and in-depth knowledge in their field of study while incorporating theory and hands-on practice into its curricula. She adds that the staff and professors are seasoned veterans in their specialisations and lectures are rich with case-studies to exercise the students’ strategic thinking process.

EASB also provides students with enrichment programmes such as grooming workshops, CV writing workshops, overseas educational trips, social etiquette sessions and other soft skills enhancement such as time management, presentation and communication techniques, self-awareness, and team-building. “Ultimately this personal enrichment package helped me transform into a wellgroomed, articulate and confident individual able to conduct myself professionally in my job,” says Zhou Fan. Tedious but worth it Zhou Fan admits that the EASB-Cardiff Met MBA is tedious and challenging but a blessing in disguise indeed. “While it challenges the mind, it stretches your ability to think out of the norm and innovate to formulate solutions. Given the opportunity to learn from past experiences of our professors and be informed on the latest changes in the industry, it gives graduates the confidence and competencies to succeed in their endeavours,” reckons Zhou Fan. She notes that the EASB-Cardiff Met MBA

enhances the students’ analysis and interactive skills. “I also learnt the importance of teamwork. This is especially important in my line of work since I need to manage my teams’ expectations and ultimately motivating them towards a common goal. The knowledge that I have gained and the soft-skills that I’ve inculcated through the MBA program and my journey with EASB opened doors to opportunities.”

Dr. Andrew Chua, principal and executive chairman at EASB, notes that academic assurance is an ultimate guarantee brought about by quality lecturers with strong industrial experience and teaching professionalism. “Service assurance is primarily achieved by our adherence to what we promised students prior to enrollment and throughout their journey with us.”

An unspoken requirement While an MBA may not ensure employment if the applicant has no relevant experience, Zhou Fan recognizes that a better education qualification coupled with diligence are some of the essentials to get a job. She shares, “During the global economic downturn in 2008, some of my foreigner friends decided to go back to their home country because they feel it is very hard to get a job in Singapore.

I did not follow. I refused to accept defeat even before giving my best. I sent out my resumes and started to go for interviews. I got a job offer from Far East Organization, then I got an Employment Pass within two weeks. What does this mean? There is always an opportunity for everyone.”

“The MBA at An MBA degree is slowly becoming an EASB is tedious ‘unspoken requirement’ for some positions in and challenging large organisations. With the right attitude, proper but a blessing in and sufficient experience, an MBA degree from a disguise indeed.” premier educational institution like EASB (http:// www.easb.edu.sg/) is sure to serve you well in your career development.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 21

CO-PUBLISHED CORPORATE PROFILE

Manulife boosts ASEAN operations Manulife has been focusing on strengthening its operations in Asia. Find out what they are doing recently in the ASEAN region specifically in Singapore, Cambodia, Indonesia, and Vietnam.

A

s Manulife celebrates its 125th global anniversary and 115 years in Asia, there is no stopping the leading Canada-based financial services company from further expanding its footprint across Asia.

Manulife has been getting positive results from its operations across Asia. As more people are expected to reside in Asia over the years and as the region proves its worth as a major development hub for international businesses, is Manulife up for a bigger strategic plan?

Singapore Manulife established its presence in Singapore in 1980, and has since grown to a reputable financial solutions provider.

With over 240 staff and over 1,000 professional financial planners, Manulife serves almost 164,000 clients and over

Philip Hampden-Smith giving his welcome address at the opening of the Manulife Centre in Bras Basah Road 22 SINGAPORE BUSINESS REVIEW | AUGUST 2012

280,000 policies.

In Singapore, Manulife topped the rankings in the Singapore Customer Satisfaction Index 2010, an independent national survey by the Singapore Management University’s Institute of Service Excellence. In 2011, Manulife came up tops for having the most trusted financial planners in the same survey.

According to Philip Hampden-Smith, Executive Vice President and General Manager for South East Asia Operations, Manulife grew by about 38% on weighted premiums in Singapore last year, which is more than 1.5 times the industry growth rate of 22%. Manulife Singapore’s growth was attributed to the increase in both regular premium and single premium business.

Besides Singapore, Hampden-Smith is responsible for Manulife’s operations in

the ASEAN area (Cambodia, Indonesia, Malaysia, Philippines, Thailand, and Vietnam).

Vietnam The Vietnam government conferred on Manulife a ‘Contribution to the Life Insurance Industry Award’ in recognition of its contributions to the development of Vietnam’s life insurance industry in 2011.

With over 12,000 financial planners and 450 employees, Manulife Vietnam was able to serve more than 300,000 families and assist them in their financial needs.

Hampden-Smith notes: “We got our first insurance pass in Vietnam 13 years ago.

We have about 15% market share and we have built a strong agency force. We have a micro insurance business there where we work with the largest NGO in Vietnam and we sell micro insurance through them.”

In June 2005, Manulife Asset Management (Vietnam) Company Limited commenced operations. It manages institutional mandates and offers mutual funds to retail investors.

From being the first fully foreign-owned life insurer in Vietnam, Manulife now holds the reputation as being the third biggest player in terms of weighted premium income in the Vietnamese life insurance industry as of December 2011.

Other achievements include being the first ISO 9001:2008-accredited foreign life insurer in Vietnam in 2011. In February 2012, Manulife Vietnam received the prestigious Golden Dragon Award 2011 from the Vietnam Economic Times, which recognizes Manulife Vietnam as one of the best foreign-direct investment companies in Vietnam.

Manulife intends to apply its strategies in Vietnam as it ventures into the Cambodian market and envisions the same success story to materialize in the country.

Cambodia The group’s life insurance operations were recently set up in Cambodia. Like in Vietnam, Manulife was the first 100% foreign player to receive the approval to set up life insurance operations in Cambodia.

CO-PUBLISHED CORPORATE PROFILE

Manulife proves its commitment to work with the government to develop Cambodia’s insurance profession and improving consumer education. “We saw the opportunity – it is somewhat a virgin territory with only one new local life insurer. We believe that we can leverage on our Vietnam experience and skills into Cambodia,” says Hampden-Smith.

Manulife plans to develop in Cambodia the same relationships it established with regulators in Vietnam. Hampden-Smith notes that since Cambodia is a small country with around 15 million people, success is within reach provided that they create a dominant position there and leverage on their experience and resources.

“Our objective in Cambodia is to capture 30-40% of the market share,” he adds.

Hampden-Smith also reckons that when a company is in a start-up position, the first four dozen employees really matter.

He notes that the team in Cambodia is indeed impressive and has quite an ‘instinctive chemistry.’ “The team we’ve put together in Cambodia is a mixture of some experienced people we brought into Cambodia but by and large most of the team are Cambodians. I’m very impressed with this core of Cambodian talents we managed to put together.”

Manulife proves to have a very interesting leadership position in Cambodia. The company is currently running a series of recruitment seminars for financial planners. “We have about four or five hundred potential candidates under review and we envision to reach a thousand financial planners within 12 months,” says Hampden-Smith.

Manulife’s success stories across ASEAN do not stop there. The company recently secured the single biggest partnership in its history, an exclusive 10-year deal with Bank Danamon in Indonesia.

Indonesia Hampden-Smith notes that compared to Singapore, Indonesia offers a huge demographic opportunity in terms of new customers to Manulife. A particular highlight of its 26-year history in Indonesia was winning out major rivals in 2011 to secure its 10-year deal with Bank Danamon in Indonesia. The partnership will enhance their joint offerings of banking, insurance and wealth management products to a broad base of Danamon customers, including microfinance, commercial and corporate customers, and has been effective since July 2012.

“This bancassurance deal is in line

Manulife Singapore launched an islandwide branding campaign in the second quarter of 2012. with our strategic goal of increasing our distribution partnerships to reach more potential clients. Manulife and Bank Danamon share the same vision that the benefits of insurance and investment management products should be a lot more accessible to the 248 million people across Indonesia,” says Hampden-Smith.

Headquartered in Jakarta, Manulife Indonesia operates through a network of marketing offices in 24 cities across the country, supported by more than 9,000 employees and professional financial planners and has approximately 1.6 million in-force policies.

Future plans According to Hampden-Smith, Manulife has close to 30,000 financial planners in Southeast Asia. Their aim is to make use of the demographic opportunity across different markets to position Manulife at the right place, in the right time with the right products and to capture the hearts and minds of as many customers as possible.

“I want to make sure that our mission of upholding trust and commitment is understood by our customers. It’s not just

about selling our products, it’s about our delivery on our promise for the long term,” says Hampden-Smith.

He adds that being customer centric and trying to put themselves in the customers’ shoes is key to continued success. “Why would I want to go to an insurance company in the first place? What am I looking for in terms of products? What kind of advice am I trying to seek? What are my financial priorities? So it’s always about putting ourselves in our customers’ shoes and at the same time always being ahead of the curve. We not only understand what our customers need for today but as a forward-thinking company, we develop a plan that looks after customers’ needs in 5-10 years’ time as well,” Hampden-Smith concludes.

“Other achievements include being the first ISO 9001:2008-accredited foreign life insurer in Vietnam in 2011” SINGAPORE BUSINESS REVIEW | AUGUST 2012 23

LEGAL BRIEFING

Singapore Exchange proposes new Mainboard listing rules for MOG firms Are the changes enticing enough or are they only adding burdens?

S

GX has recently proposed a set of amendments to the Mainboard listing rules aimed at attracting more mineral, oil and gas (MOG) companies. This follows the introduction in 2011 of MOG listing rules for the Catalist board.

Rajah & Tann partner Goh Kian Wee believes that the proposed rules cater to MOG companies which may not otherwise meet the stringent quantitative requirements of listing on the Mainboard, considering that they are highly technical in nature and capitalintensive.

Herbert Smith partner Richard Nelson has a different view. While the proposed rules include many similarities to the current rules for Catalist, he cautioned that MOG companies could face a more robust regulatory framework.

What are the key proposals on initial listing?

According to Nelson, the SGX proposes that MOG companies that have not yet met specified profitability and other financial benchmarks have a minimum market capitalisation of at least $300M, as opposed to the existing $80M. They are also required to disclose their plans, proposed capital expenditures and milestones to advance their projects to the production stage.

Also, the prospectus would need to include a valuation report of the company’s reserves and resources prepared by an independent qualified person. This could form part of the qualified person’s report (QPR) to be included in the offering document.

The proposed rules include detailed guidance on the permitted technical reporting standards and required

“The proposed rules cater to MOG companies which may not otherwise meet the stringent quantitative requirements of listing on the Mainboard.” contents of QPRs – social, environmental, and health and safety factors that may affect exploration or exploitation activities.

A MOG company would be required to disclose in its prospectus a legal opinion regarding its compliance with all relevant laws and regulations and title to and validity and enforceability of rights to its assets.

According to Nelson, as a possible alternative to disclosing a legal opinion, the SGX has suggested that issue managers provide a statement in the offering document that proper due diligence has been 24 SINGAPORE BUSINESS REVIEW | AUGUST 2012

Goh Kian Wee

Richard Nelson

Sin Boon Ann

conducted on these matters.

“Due to the long lead times that are common for MOG projects to move from the exploration stage into the production stage, the SGX proposes that all MOG listing applicants demonstrate sufficient working capital to meet their present requirements and for at least 18 months following listing,” he said.

Furthermore, the proposed rules would prohibit disclosure of ‘prospective resources’, which are quantities of oil and gas resources potentially recoverable from undiscovered accumulations not classified as contingent resources or reserves under the applicable technical reporting standard.

Nelson said that this proposal may be particularly relevant to early-stage oil and gas exploration companies. “In Hong Kong, by comparison, the disclosure of prospective resources is permitted so long as appropriate risk factors are included,” he explained.

What are the key proposals with regards to continuing obligations?

Once listed, MOG companies would be required to make an immediate announcement to the market whenever there has been a material change to their reserves or resources, substantiated by a QPR. Also as an additional continuing listing obligation, MOG companies that have not achieved certain profit benchmarks or whose principal assets have not entered into production would be required to make quarterly announcements disclosing the use of their funds during the previous quarter and their projected use of funds for the next immediate quarter.

What is the implication to capital markets?

According to Drew & Napier deputy managing director Sin Boon Ann, the proposed framework strikes a good balance between granting MOG companies access to Singapore’s capital markets, whilst being subject to safeguards such as listing qualifications and disclosure. “We will be interested to see if MOG listing applicants can pull off the challenging task of giving Singapore’s investing public clear, focussed and relevant information in their offer documents about their businesses, operating environments, and the risks of investing in their shares,” he said.

“This may be difficult, given the complexity of their business, the additional disclosure requirements they must meet, and offer documents becoming increasingly bulky in today’s market. However, we believe that the Exchange will continue to refine its approach to regulation in this new area using ongoing feedback once its MOG listing framework is in place,” added Sin.

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SINGAPORE BUSINESS REVIEW | AUGUST 2012 25

ANALYSIS: CHINA’S SHADOW BANKING

All you need to know about China’s fragile $2.2 trillion shadow banking system Is the world’s third-largest economy in jeopardy because of the country’s shadow banking system? By Matthew Boesler

I

t is clear that the Chinese economy is slowing, and some think the risks of a hard landing are rising substantially.

If economic growth in China continues to slow, rising and sudden defaults on loans made in the country’s shadow banking system could threaten to bring down China’s traditional banking sector and throw the world’s third-largest economy in jeopardy, according to Bank of America Merrill Lynch China Strategist David Cui. The hodgepodge web of nonbanks that comprise the shadow nexus in China includes pawn shops, underground banks, various wealth management products, trust companies, and guarantors – many of which don’t take deposits to insure against risky lending activities and operate completely beyond the eye of regulators and authorities.

26 SINGAPORE BUSINESS REVIEW | AUGUST 2012

“The amount of loans made by shadow banking entities amount to 25% of all the loans made in China.”

What follows are highlights from Cui’s comprehensive report examining China’s shadow banking system.

Why the shadow banking system in China is so important The sheer size of the system is overwhelming. At an estimated 14.5 trillion RMB ($2.2 trillion) according to BofA, the amount of loans made by shadow banking entities amount to 25% of all the loans made in China by the traditional, regulated banking sector.

The system is also highly leveraged. Shadow lenders make most of their money by borrowing from regular banks at low interest rates and lending out at higher interest rates to riskier borrowers.

No deposits at these institutions means they are highly vulnerable to loans gone bad, especially given the types of less-than-creditworthy

clients who borrow from shadow banks.

Cui walks through the shadow banking system in China and takes a look at the institutions that comprise it and the unique risks posed by the activities of each.

Shadow banking entity #1: The investment trust industry Investment trusts are basically companies that manage other people’s money by lending it out to finance various business projects or property loans on the one side and, on the other, guaranteeing a certain percentage return to the investors.

Cui says his team at BofA has “noticed early signs of stress in the system, e.g. at least three property trust products had failed to meet their repayment schedule and had to be bailed out”. Furthermore, he estimates that leverage in the investment trust entities “remains high, often reaching 10-15x.”

Not only is the trust industry highly leveraged, but also highly concentrated. Of the 62 Chinese investment trusts, 10 of them account for half of all assets under management industry-wide, and 20 account for 72%.

The huge issue in Cui’s mind is the total lack of transparency in the investment trust industry.

Only two of those 62 companies

ANALYSIS: CHINA’S SHADOW BANKING are required to disclose any sort of investment returns. This leads to investment “pooling,” wherein a trust will take an investor’s money and invest it in multiple projects at the same time.

Bottom line: If property prices and other investments turn sour and highly-leveraged, highlyconcentrated investment trusts have guaranteed a certain level of returns to investors, they will have to be bailed out or they will face collapse.

Shadow banking entity #2: Pawn shops There are over 4,000 pawn shops spread across China. They will probably provide the earliest warning signal that the system is melting down, according to Cui. Pawn shops will show up on the radar first because of the nature of their lending business: most borrowers seek loans from pawn shops for extremely short periods of time, and for the typical borrower, it only takes one to three days to secure a loan.

So, with the pawn shops, it’s all about short-term lending. And, being pawn shops, they accept all sorts of collateral against these short-term loans – everything from cars and jewelry to financial securities like stocks and bonds, and property.

Bottom line: The property is a big issue, because if volatility in China’s property market continues and property prices take a further tumble from here, thousands of pawn shops will be left holding the bag on defaulted loans backed by collateral that is heavily discounted in value.

Shadow banking entity #3: Guarantors China has guarantors of over 19,000 different businesses. They provide guarantees on loans to risky borrowers, making it more palatable for traditional banks to lend to those who are less creditworthy than the average client.

The upshot here is that guaranteeing loans to risky borrowers isn’t that great of a business to begin with since a guarantor makes probably half the

rate on a given loan that a pawn shop does, for example.

Cui surmises that “the biggest risk in the industry is guarantors are acting more like a lender rather than focusing on their core guarantee business.”

What do the guarantors do to make money instead? They literally take a portion of the loan they are guaranteeing from the borrower they are guaranteeing and lend that money back into the shadow banking system to other underground borrowers.

The net effect, of course, is amplified leverage within the shadow nexus.

Bottom line: When those new shadow loans blow up (potentially due to any of the four triggers mentioned at the beginning of this article), it is the clients – who are supposed to be guaranteed by the guarantors in the first place – that end up footing the bill.

Cui writes that “many of their clients have been sued by their banks for loan repayments although the borrowers claim that their guarantors have been using the fund,” and that “some of these borrowers are now seeking help from the municipal government of Beijing to negotiate for a loan extension with the banks.”

Shadow banking entity #4: Underground banks Cui calls underground banks “arguably the most unstable shadow banking sector”. And the commodities business is currently a major player in this area.

Letters of credit – trade finance agreements in which a bank pays the seller of a commodity and then goes and collects payment from the buyer of the commodity – are booming, and they are off-balance sheet vehicles, meaning they don’t factor into the traditional banking sector’s balance sheet leverage ratios and regulations regarding loan quotas.

Cui points out that many of the companies that are shut out of the official loan market are resorting to securing letters of credit from banks using copper and other commodities as collateral.

Bottom line: Cui says these practices in the steel market are potentially explosive because “local warehouses, unlike those four or five well regulated in bonded areas, often

“The underlying problem facing all the institutions that make up China’s colossal shadow banking system is a slowdown in growth.”

provide multiple bills of lending to traders so they can obtain loans from different banks using the same steel inventory.”

Shadow banking entity #5: Wealth management products Wealth management products set up by traditional banks have some characteristics that are similar to trust companies that cause concern, and there are rumblings that a lot of the industry could be operating one big Ponzi scheme.

Indeed, the biggest problem with wealth management products in China is that by and large, no one has any idea what they are investing in or what kind of returns they generate.

Cui writes, “So in theory, the bank can invest up to 70% of the fund in areas we have zero information on.”

Bottom line: Pooling is a big concern. Cui says banks will “issue multiple WMPs with various durations, pool the funds together, and invest in various areas with different durations jointly and pay out ‘expected’ returns from the pool.”

Cui continues: “According to some industry insiders, some banks have been using new WMP proceeds to cover losses from previous products in the pool – in our view, this is not fundamentally different from a Ponzi scheme. However, the music may stop at a certain point if/when WMP asset size stops expanding.”

The underlying problem facing all the institutions that make up China’s colossal shadow banking system is a slowdown in growth.

In fact, we wrote about four major triggers that could bring down China’s shadow banks, all of which stem from continued economic weakness, just like the one China is currently experiencing. The four triggers are 1) (Illegal) Ponzi schemes falling apart; 2) a wave of defaults in highly-leveraged loans within the shadow banking system; 3) more turbulence in the Chinese property market; and 4) shrinking corporate sector earnings.

Given the shadow banking system’s enormous size, importance to the real economy in terms of the credit it provides, and the numerous feedback loops back into the traditional banking sector, China could face major issues if it starts to look like no one is able to pay anyone else back.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 27

OPINION

JAMES LEONG C. FOO Words to make you sound smarter

C

hances are if you work with an MNC, a local public listed company, an SME or even a non-profit organisation in Singapore, you will be bombarded with financial and accounting jargon whether you like it or not.

You might have passed a module of accounting, hated it absolutely and thought it might be the last you have to deal with this boring topic after you left school. But you find you cannot escape from its pervasive (some say “perverse”) presence in organisations. Well, here’s why.

Management is the steward of financial assetswhether they are contributed by shareholders for commercial enterprises or stakeholders such as government bodies and members of public for nonprofit organisations.

They are accountable to stakeholders to use the funds wisely for the intended purpose of the organisation and to earn a return for profit or cost recovery. The tools they use to ensure accountability are largely financial ones.

To be a member of the management team means you need to be a steward. To earn your stripes, you need to learn to speak the same language as management. When you lead a team, you have responsibility for the bottom line.

You must know what drives financial performance and what is it that your boss is always managing, as well as how to excel in it.

According to legendary investor Warren Buffett, “Accounting is the language of business”. So what are some magic words you can borrow from the accountant to turbo-charge your career when presenting ideas to your boss and get that important endorsement?

term contracts with price escalation clauses.

“Operating cycle” Show how your ideas improve the time it takes to sell your company’s products. This could be achieved by making better merchandising decisions, buying the right quantities to match demand or stimulating sales. Ways to encourage customers to pay early will be well received.

Together, these would shorten the operating cycle and increase the company’s liquidity, which is good for cash flow.

“Operating leverage” Businesses with high fixed costs relative to variable costs (high operating leverage) are very sensitive to changes in sales volume and “What are some magic words you can their profitability swings will be amplified by borrow from the accountant to turbothe business cycle. Fixed costs are those that not vary with sales volume while variable charge your career when presenting ideas do costs do.

For example, you pay the same rent to run a to your boss and get that important factory one or three shifts a day, so it is a fixed endorsement?” cost. On the other hand, each iPhone that Apple produces would cost it some amount of money.

“Shareholder value” Hence its cost of sales will be variable. Showing Couch your proposals in terms of how it could how your ideas can shift components of fixed costs enhance shareholder value. This can be achieved to variable costs when a downturn is approaching by increasing the organisation’s cash flows, or cause would help to reduce the pressure on sales volume the same amount of cash flow to be received earlier needed to breakeven a business operation. You could rather than later. help save jobs.

The alternative is to minimise risk in business So, get ahead in your career by using these magic activities. Risk could be reduced by diversifying words when you have an idea to present to your boss! revenue streams and customer base or having long28 SINGAPORE BUSINESS REVIEW | AUGUST 2012

BY JAMES LEONG C. FOO CEO of VisionsOne Consulting Pte Ltd.

How smart can you get?

CO-PUBLISHED CORPORATE PROFILE

Messages On Hold Revolutionises Voice Branding As the market leader in Voice Branding, Messages On Hold helps you deliver outstanding customer experiences over the telephone

M

essages On Hold is one of the best epitomes of humble beginnings turned into a phenomenal success.

From a one-man business, it has grown into a global company serving more than 13,000 sites in 20 countries. Managing Director Kym Illman fondly recalled, “It started out as a one-man business with me scripting, voicing and mixing the audio productions in my spare bedroom.

I initially sold audio on endless loop cassette tapes, a technology not even available now.”

Audio recording and voiceover expertise Messages On Hold Singapore specialises in audio and voice recordings for every type of phone system: PABX, VoIP/IPenabled, and Interactive Voice Response (IVR).

For the small to medium sized

businesses that use PABX, Messages On Hold offers promotional on hold messages that require playback equipment to plug into the phone system. These businesses, however, are rapidly replacing PABX systems with VoIP/IP-enabled phone systems. Illman said, “The change from PABX to VOIP phone systems provided us with new opportunities as has advanced Speech Recognition and Text-To-Speech systems. This evolution in technology demands a similar evolution in the products and services we offer.”

With its focus and depth of experience, Messages On Hold is now the market leader for on hold marketing, music on hold, auto-attendant messaging, after hours messaging, contact centre IVR recordings and voice branding.

Illman notes that voice branding for complex IVR systems is a very rapid area of growth. “While most multi-nationals have focused largely on their online interactions, many are now realising that

“This evolution in technology demands a similar evolution in the products and services we offer.”

the customer experience they deliver via a voice call has suffered tremendously as a result.”

Crafting an exceptional Voice Brand Voice Branding, or the strategic use of professionally recorded voice announcements to reinforce a brand, has oftentimes been neglected by many organisations. For just a fraction of the cost of the technology investment, a professional Voice Brand can drive revenue by assisting call agents to up-sell and cross-sell and create cost savings by handling calls more efficiently. While the Avaya Contact Centre Consumer Index for Asia Pacific reveals that 75% of respondents surveyed say they contact a company mostly via telephone, most of them are welcomed by a poorly voiced IVR system that just makes them drop the call.

“When creating a Voice Brand, Messages On Hold does the creative scripting, professional voicing and expert audio production. In other words, every stage of Voice Branding process is completed in-house by specialist teams.

With its expertise, Messages On Hold can quickly identify where in the call flow is the best place to insert subtle Marketing Messages or helpful Customer Service Announcements, and how to script each accordingly to maximise its effectiveness i.e. the music and language will differ depending on the caller’s enquiry, position in the call flow and psychological state of mind.”

As the only audio marketing firm in Asia-Pacific to specialise in Voice Branding, Messages On Hold customer base includes such household names as SingTel, Citibank, Maybank, StarHub and MobileOne, all of whom entrust Messages On Hold to manage the recorded voice prompts that comprise their unique caller experience.

Illman concluded, “With our help they can ensure every voice interaction is branded to be warm and engaging and an experience that their callers actually look forward to, rather than dread!”

SINGAPORE BUSINESS REVIEW | AUGUST 2012 29

ANALYSIS: ASIAN ECONOMY

Living in Asia after the bust

The tale that has been told in countless books and, dare we say, business magazine articles, is one of an ever rising Asia that will one day achieve income parity with the West and live happily ever after. But what if it doesn’t work out that way?

W

hat if Asian economies stall halfway, never able to close the productivity and income gap with the West? What if they are caught in a no man’s land of no real growth, no real income gains, and increasing price inflation that makes the lower orders feel like they are actually going backwards? What if the promise of a better tomorrow becomes undeliverable, and the reality of a harsher today unbearable for half of the world’s population?

For those living memory of poverty, the prospect that they may have reached the highest rung on the ladder out of hard times and may actually be sinking back is scary. And made worse by the fact that there is little they may be able to do to affect their lot in life.

From Singapore to Manila, workers are beset by limited prospects of a higher salary tomorrow whilst incessant inflation at 5% or more erodes their recent gains and leaves 30 SINGAPORE BUSINESS REVIEW | AUGUST 2012

“Malaysia, Thailand, Sri Lanka and the Philippines have not improved their position relative to the US in 4 decades!”

them struggling for answers and a future. Five years after the economic crisis began, and far from the war cries of Europe, the forgotten economies of Asia are beginning to resemble adolescents who never flourish into adulthood, never able to really enjoy the sweet taste of the fruits of their labors. This, then, is the Asia of today, but is it the story of tomorrow? Asia’s tiger economies have slowed from high single digit growth rates to low single rates or even negative over the last five years, but once this global crisis is over will they resume their growth?

Middle Income trap As Frederic Neuman, an economist at HSBC, notes, it is easier to grow fast when poor, hard to do so when rich. “Lurking beneath all of this is the Middle income trap. History shows that in some countries growth slows so much as they mature that they never break onto higher

ground, forever stuck in a range where per capita income doesn’t rise meaningfully further.” All countries in Asia are no doubt better off than they were 40 years ago, but how are they going in the “catch-up to the West” stakes? To answer this, Mr Neuman and his team compared PPP income as a share of US income, all expressed in logs, in 1970 and in 2009.

What the data shows is that remarkably Malaysia, Thailand, Sri Lanka and the Philippines have not improved their position relative to the US in 4 decades! This suggests extreme policy failure. Next come the countries of China, India, Indonesia, and Vietnam, which have improved their relative incomes somewhat, compared to the US and have graduated from low income to middle income status. Korea, Taiwan, Singapore and Hong Kong have moved into the high income bracket while only Australia, New Zealand and Japan have stayed rich. So is it

ANALYSIS: ASIAN ECONOMY just a case of ‘same as it ever was‘? Not quite.

Asia has undoubtedly made a lot of progress, according to Iwan Azis, head of ADB’s Office of Regional Economic Integration.

“The financial sector has improved since the Asian Financial Crisis in 1997; fiscal consolidation has taken place, ‘self defense’ through building up foreign reserves has been strengthened, and in some countries the restructuring of the real sector is continuing,” he noted. He also emphasized that the mere fact that Asia remains relatively strong even 5 years after the crisis is a clear testimony to the success of efforts made after the 1997 crisis.

Red Flags The current deceleration of growth in Asia will not end the “double track growth,” but at the same time it should raise some red flags in the region, says Azis. “Here is where the policy response matters a lot, because at the end of the day it is not the severity of the crisis but the policy response that determines the final outcome. If the current growth deceleration is accompanied by a reduction in the risks emanating from bubble creation, excess dependence on exports, and the transition associated with the process of adjustment towards more domestic demand and regional demand, then the growth slowdown should not be a major concern; it may even be

something the region should seek.”

He adds that Asian economies also need to tackle the increase in income inequality. In some countries, he says, there are concerns about polarization and effective economic and social policy measures will be needed, supported by adequate fiscal support where required. “When all these policies are done in coordination, or cooperatively, the likely net benefits can be higher than if done unilaterally. Given the resources, the rising degree of integration and cooperation, the region’s continued open economy, and the improvements made since the Asian financial crisis, there is no reason why breaking out of the middle income trap is not possible for those Asian countries currently struggling with that threat.”

But Professor Markus Brückner of National University of Singapore believes that the question is not whether Asian economies will ever catch up with the West. “I think that given the historical experience from reversals of fortune, this will happen with near certainty. The question is rather: when will Asian economies achieve income parity with the West?,” he reckoned.

So are countries’ fates predetermined in some kind of country eugenics program wherein their peoples cannot escape their destinies?

“I don´t see what that pre-determined fate would be,” added Professor Brückner. “I believe that whether

Latest per capita income (in 000s)

Source: PWT, World Bank, CEIC, HSBC; NB: constant USD for 2011, PPP for 2009

Markus Brückner

Iwan Azis

Asia will continue to grow will depend, to a large extent, on policy choices (in particular with regards to the protection of property rights; openness to international trade; and financial sector regulation).”

“Just because a country has been trapped in the middle or low income bracket, doesn’t mean it can’t break out in the coming decades,” said Mr Neumann, who cites the Philippines which has recently experienced a structural improvement in growth, with the economy expanding much faster over the last few years than, say, in the 1970s or 1980s. “Still, as a first guide, this analysis highlights that even in Asia, a region accustomed to higher, and more sustained, growth rates, such as Latin America, for instance, it cannot be taken for granted that countries swiftly graduate from one income bracket to another. Development is a long and arduous process.”

Latest per capita income (in 000s)

Source: PWT, World Bank, CEIC, HSBC; NB: constant USD for 2011, PPP for 2009

SINGAPORE BUSINESS REVIEW | AUGUST 2012 31

OPINION

TIM STAERMOSE The coming American diaspora

I

BY TIM STAERMOSE Chief Investment Strategist Sovereign Man www.SovereignMan.com

n Indonesia’s Lampung province, I was following a sprightly Chinese woman, well into her 70s, as she showed me around her thriving home appliances and furniture shop.

It was an amazing thing to see The three-story shop-house was both the family home, and business premises. Yet every available space was stacked high with goods for sale, including family kitchen and living space.

When I asked her whether her business had always been here, she held her hand out, palm flat to the ground, about 2 ½ feet high and said, “Since I was this tall.”

No doubt, her ancestors had been among the wave of Chinese economic refugees who moved to South East Asia in the late nineteenth century to work as laborers for the British and Dutch colonial powers.

To this day, more than ten million of their descendants remain in Singapore, Malaysia, Indonesia, and the Philippines. And in each country, they’re disproportionately successful.

Two days later, back in Hong Kong, I got to talking with the owner of my favorite Lebanese restaurant.

He and his brothers fled their homeland during the civil war. They eventually ended up in Hong Kong where they run several successful businesses.

I asked him whether the current euro malaise is affecting things back in Lebanon in any noticeable way.

He said, “You know, the Lebanese always complain how tough they have it. When I go back and I’m in some fancy restaurant talking to the

abroad, even those who send remittances back home.

The real score In the US, real median incomes have not grown since 2007. Those on the lower rungs of the income ladder have fallen backwards.

Net household wealth remains some 37% below its peak. All gains since 1992 have been wiped out. For the first time ever, a new generation of Americans faces a bleaker economic future than their parents. This shocking reality may be new for the US, but it’s an old song for most of the world. Countries rise to prosper, and countries decline. It is the natural order of things.

As the waves of migrant workers and “In the US, real median incomes have business owners can attest, there is always you can do to combat domestic not grown since 2007. Those on the lower something economic challenges. As Simon likes to say, ‘this time is not different.’ rungs of the income ladder have fallen Whenever there is a great upheaval, backwards.” ambitious, productive people leave their homelands and put down roots where they can find safety and better opportunities for other diners, they complain. Yet they’re there, themselves, their families, and future generations. spending hundreds of dollars.”

Today, that means countries like Singapore, Chile, “The secret with us Lebanese is there are only Brazil, southeast Asia, etc., all of which we write 3.5 million at home, and 15 million overseas. So about frequently in this column. everybody has a brother, or an uncle, or a cousin With long-term prospects for freedom and who’s helping out sending money back.” economic opportunity back home so sparse, The current slump in the US and Europe maybe it’s time to begin thinking in this new could easily lead to a similar wave of Diaspora– direction: internationally. economic refugees who find better opportunity 32 SINGAPORE BUSINESS REVIEW | AUGUST 2012

Here come the Americans!

CO-PUBLISHED CORPORATE PROFILE

New QROPS rules and UK inheritance tax, are you affected?

Find out how you can be subject to the IHT regardless of your nationality.

John Booth Principal Consultant (Expat, Advisory Group) President of the Chairman’s Round Table 2010 & 2011

“All nationalities are subject to UK inheritance tax on all their UK based assets over the nil rate band allowance ( the amount you can take tax free) of £325,000”

Inheritance tax can be due on UK assets.

Qualifying Recognised Overseas Pension Scheme, to move or not to move, that is the question.

John Booth of IPP Financial Advisers discusses how UK inheritance tax applies to anyone with UK based assets and to worldwide assets for British Nationals. Also how the last UK budget affects the QROPS market for anyone with a ‘Frozen’ pension left in the UK. Most people know that inheritance tax was abolished here in Singapore.

However, how many people realise buying UK based assets will make them subject to UK inheritance tax regardless of their nationality? Indeed, an average central London 2-bed flat or even 100,000 HSBC shares could make a Singaporean or anyone who has never even been to the UK liable to over a £50,000 in UK inheritance tax.

To be clear ALL nationalities are subject to UK inheritance tax on all their UK based assets over the nil rate band allowance ( the amount you can take tax free) of £325,000.

So before adding to your UK asset portfolio be sure to take this into account.

IHT – Quick Facts What is considered to be taxable for British Nationals?

All your worldwide assets, cash, property, shares, etc., even your life insurance policy and pension can count. Also any transfers of assets which occurred within seven years of the individual’s death.

It all comes down to a question of “domicile”.

Domicile in this context is not simply a matter of living and working abroad but have you taken steps to permanently sever all ties to the UK with the intent never to return? The bank account you took out as a student, the club membership you are keeping for old times sake and even your private pension can link you back to the UK and the 40% IHT. You may not have lived or paid tax in the UK for years.

This is not the same thing as having taken up permanent domicile in another country.

Also if you leave your new country to live elsewhere you will revert automatically to having UK domicile.

Non-UK domiciled spouse Your assets may pass tax free to your spouse until their demise BUT NOT if your spouse is non-domiciled to the UK. A non-domiciled spouse only has a £55,000 personal allowance, and IHT is payable upon your demise and before probate is settled.

How will Her Majesty’s Revenue & Customs know?

All parties concerned with your assets are “subsidiarily liable” for payment of the tax.

In short, before any assets or funds are transferred they will seek clearance from HMRC. Also when your passport is returned to the UK it will trigger a waiting for probate file.

QROPS – Quick Facts Until recently it was not possible to transfer a UK pension to another country.

This is because, in return for the tax-relief received on your pension contributions, HMRC makes it compulsory

to purchase an annuity with at least 75% of the pension’s final value regardless of where the pensioner retires in the world. Any residual value on the pensioner’s death is collected by HMRC rather than being passed to the deceased’s estate. Today, with the permission of HMRC through a Qualifying Recognised Overseas Pension Scheme, it is possible to move your pension offshore and benefit - without the compulsion of purchasing an annuity. Following the last UK budget and the tightening of the QROPS rules, it has become very clear that you should be aware of all your options before deciding which course of action to follow.

Clearly, these two issues are very complex matters and the situation varies from case to case. It is vital that this is not just left as something to get around to one day. It is best to speak to an expert who can fully evaluate your position before offering professional advice. Call today for a no-obligation, no-cost appointment.

IPP Financial Advisers Pte Ltd and the author, in any event, will not be liable to you for any direct/indirect or any other damages or losses of any kind arising from or in connection with your reliance on any information in and/or materials contained in this article. Although the author has made the best efforts to provide accurate information, no warranty or guarantee is given regarding the accuracy, reliability, veracity or completeness of the information provided herein.

IPP Financial Advisers Pte Ltd 78 Shenton Way, #06-01 (S) 079120 Tel: 6511 8873 Mobile: 9138 8516 Web: www.ippfa.com/eag Email: johnbooth@ippfa.com SINGAPORE BUSINESS REVIEW | AUGUST 2012 33

BIG ISSUE 1

Do low interest rates pose a threat to Singapore’s economy?

An analyst argues that increasing the rates is needed to reel in the inflationary pressures.

T

he debate rages on whether Singapore should raise the threshold for monetary easing now that interest rates are well below their average level during the Lehman crisis.

According to HSBC economist Frederic Neumann, the policy rates of Hong Kong and Singapore are now well below their average level in the 3Q 2008 and hence, in itself, should be an alarm bell to clamp down on monetary easing.

“In fact, central bankers in Asia have grappled for the past few years with the effects of overly loose monetary conditions. Easing policy further, even if it provides a little relief in the short term, could provide even bigger headaches later on,” he warned.

Neumann says that with the exception of Malaysia, the Philippines, and Thailand, interest rates are more stimulative today than in the run-up to the Lehman bust.

This suggests that interest rates would not have to fall by as much as in 2008 to rescue growth should another global slump of equal magnitude occur.

Here are other views from other 34 SINGAPORE BUSINESS REVIEW | AUGUST 2012

“Low rates may create the potential risk of credit and asset bubbles, such as in the housing market”

analysts: Vincent Conti, Economist for Emerging Asia, ANZ Research There is a general consensus that rates in advanced economies will remain at historic lows for a prolonged period, given the slow pace of economic recovery in these areas as well as guidance from their central bank statements.

This means that Singapore rates will stay near the current levels for the foreseeable future as well. In terms of the possible effects, low rates may create the potential risk of credit and asset bubbles, such as in the housing market.

However, these risks are being mitigated by other fundamental and policy factors.

Credit growth is gradually moderating as uncertainty about the global economy rises. Meanwhile, the MAS is cooling the property market via macro-prudential measures such as higher taxes on foreign buyers of property, seller’s stamp duties on properties sold within a few years of purchase, and lower loan-to-value ratio caps.

Wai Ho Leong, Senior Regional Economist, Barclays Capital The exchange rate remains the best monetary policy tool for Singapore given our trade reliance.

And even if we get bouts of capital inflows into our asset markets, we can regulate the surges by adjusting prudential requirements appropriately.

The five rounds of property market cooling measures are a case in point.

Most recently in last December, the government slapped an additional buyer’s stamp duty of 10% targeted at foreign purchases and corporates.

It appears that foreign buying fell sharply in Q1 although interest has started picking up again recently.

I won’t be surprised to see a sixth round if transactions volume continue to be this high.

Macroprudential measures have their limits of course, especially in such a prolonged period of excess liquidity. Asset price inflation has already spilled over to general consumer price inflation.

As such, the central bank has been tightening the exchange rate policy, that is, allowing a faster pace of SGD appreciation.

In fact, taking both the exchange rate and interest rate into account, overall monetary conditions in Singapore have actually tightened quite a bit post-Lehman.

Andrew Taylor, Market Strategist, GFT Australia Singapore currently enjoys an extremely accommodative monetary policy that has seen its rates at a negligible 0.03%. This low cost to borrow has provided Singapore with strong growth and elevated inflation levels.

Many countries would love to have this economic landscape to manage especially as Europe and the US head for another recession.

The balance for Singapore is that their Debt-to-GDP ratio is at levels that if too large of an interest rate rise was to be introduced, then they could see an unravelling of an overleveraged market.

I believe they do need to start increasing borrowing rates to reel in the inflationary pressures but it would need to be done with minimal raises over time to allow borrowers to adjust to the rising costs.

BIG ISSUE 2 quality than other economic sectors.

Larger exposure is to the broad real estate segment (at close to 40% of loans), of which two-thirds are mortgages and the rest to property developers and investors. Many developers and investors have healthy leverage, with sharp delinquencies likely to surface only in a prolonged property sector trough. Fitch expects a low asset-quality threat from mortgages, with job losses likely to rise modestly and interest rates staying low. This backdrop also supports other types of consumer loan quality. This includes credit cards, which are unlikely to be a major threat to the industry as this portfolio accounts for less than 2% of system-wide loans, with the chargeoff rate steadying at 4%-5% over the past two years.

Do Singapore banks feel the squeeze from the Euro crisis?

Analysts remain positive despite deposit and loan decline

M

arkets concerned about falling deposits and loans might want to focus more on deteriorating bank asset quality.

System loan growth slowed to 1.4% in 4Q12 from a year ago at 6.1%. Sequentially, loans shrank 0.3%, largely led by a 1.4% mom dip in ACU loans. Credit demand in Singapore, too, showed signs of exhaustion, with DBU loans growing 3.5% in 4Q12 against the previous year’s 8.8% and 0.6% mom.

Property-related loans once again led the growth at +1% mom increment, forming 75% of April lending but 4Q12 business loans slowed to 3.1% compared to +14.8% in 2011. Loan repayments in commerce dropping by 1.1% mom and other business loans by 1.7%, meanwhile, offset transport-related loan growth of 6.2% mom.

So what do analysts have to say about the downtrend?

Kenneth Ng, analyst, CIMB The moderation in loan demand is in fact in sync with our 12-15% growth expectation for 2012. The

“Fitch’s GDP growth forecast for 2012 is 2.5%”

decline in ACU loans should have stemmed from fewer trade-financing opportunities in the region. Our biggest concern remains asset quality.

Asset quality continued to deteriorate with April credit-card charge-off rates inching closer to their 10-year average of 5%.

Credit-card charge-off rates continued to climb in April, to 4.53% from 4.46% in March.

Alfred Chan, analyst, Fitch Ratings Singapore banks’ asset quality is at its strongest years.

Nonetheless, Singapore is a small open economy, and would be vulnerable to falling global trade.

This scenario remains a possibility due to the mounting uncertainties globally, including the sovereign crisis in Europe and a slower Chinese economy, although the export and manufacturing statistics have held up fairly well to date. Given the trade linkages, the manufacturing, general commerce and shipping industries (which account for about 30% of the banks’ loans) tend to show an earlier and faster deterioration in asset

Justin Harper, trader, IG Markets Singapore’s banks recently posted healthy quarter one earnings cementing their position as some of the world’s strongest and safest banks. While the banking sector in Europe is showing worrying cracks under the strain of the eurozone crisis, Singaporean banks are worlds apart.

They are well capitalised, have strong balance sheets and are constantly looking for expansion opportunities within Southeast Asia.

DBS is the latest bank looking to expand its footprint with its pursuit of Indonesian bank Danamon.

However there are a few dark clouds on the horizon. Asian banks are feeling the squeeze from the eurozone crisis which has damaged the global economic recovery. And revenues in Singapore are being tested with smaller loan business.

Charge-off rates are also falling back to their long-term averages which means another income stream is shrinking.

But on the plus side, European banks are reducing their exposure to Asia and pulling out lending facilities in the region. This has left a gap which Singapore’s banks are poised to fill, helping to cancel out some of the downside risks.

On the whole, I think Singapore’s banks are in a healthy state and should be resilient enough to weather the economic storms from Europe and our domestic market.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 35

HONG KONG VIEW

TIM HAMLETT

TIM HAMLETT Former Editor of Sunday Standard and Associate Professor of Journalism

The appeal of uniforms

A

wide variety of official pictures announced the arrival of our new CE and his selected advisors. One thing was really strange about them: all the men (there was only one woman) were wearing the same thing. Every man was wearing a uniform. Not a military uniform or a police uniform or an MTR uniform, but a uniform just the same.

This consisted of a suit in lightweight charcoal grey worsted. No visible stripes or pattern. A white shirt. There was some variation in the choice of tie. Where the picture extended low enough, everyone was wearing black shoes.

Unsuitable suits There are a number of things we can say about this get-up. The first is that it is completely incompatible with the Hong Kong climate.

The whole look was designed for Northern Europe and wearing it in the open air here is an ordeal. This does not mean that our future leaders were voluntarily exposing themselves to discomfort, of course. It means that in the normal course of events, everywhere they go, apart from the short distance from building exit to car, is air-conditioned. It is furthermore air-conditioned to a fairly low temperature, because so many people in it are going to be dressed in the same way.

Suit for business You could say, I suppose, that they were being lazy. The nice thing about a uniform, as C.S. Forester observed long ago, is that it spares you the exhibition of personal taste involved in choosing your own clothes. Whether it looks good on you, or looks good at all, does not matter. You did not select it; you wear it because you have to.

But there is really no reason to be as uniform as people commonly are in Hong Kong. Business requires a suit. It does not require dark grey monochrome. I assembled a small collection of suits when I was doing a lot of television work. One does not wish to appear to be wearing the same thing all the time so I had different colours: dark blue, brown, dove grey. People who go in for the same boring look have chosen not to choose. There is similarly no reason why the shirt should always be white. I must confess that all my surviving ones are. Again this is laziness. It saves you worrying about whether the suit, tie and shirt as a combination go together.

A Hong Kong thing Actually this desire to dress the same seems to be a Hong Kong thing. I was bemused to read that the commander of our PLA garrison does not let his men out in case their “martial spirit” is diluted by contact with Hong Kong people. Has he not met any Hong Kong people? Our countryside resounds every weekend to the noise of amateur wargames. I came across a large contingent in a country park last year and was impressed not only by their numbers but by the uniforms, all matching and all purchased at considerable expense. The Boy Scouts, which in other parts of the world is a relaxed introduction

36 SINGAPORE BUSINESS REVIEW | AUGUST 2012

to the skills involved in open-air activities and living, is in Hong Kong a paramilitary organisation, replete with heavy boots, foot drill and a large military band. I once played at a parade for Red Cross nurses. They were all in nurse uniforms, but the performance was the usual passing out stuff at light infantry speed. The medical usefulness of foot drill to this standard seemed to me questionable.

I occasionally used to come across students who had been in one of these organisations. They usually said they enjoyed doing drill.

It was the togetherness. Mainland graduate students have all done it as a compulsory subject at university. They regard it as a waste of time. Which just shows you that people generally like what they choose and reject what is forced upon them, a point which local curriculum planners have great difficulty with. But I digress.

Suits in perspective Hong Kong people slip into uniform very easily. In very early photographs, where the local population is still in traditional Chinese, everyone is already wearing the same thing. Same gown, same hat. Nowadays shop assistants, receptionists, street sweepers, waiters... every job has a uniform. The Western suit is of course the uniform of business. Real estate salesmen swelter in it when showing people round our estate. I suppose they would not be taken seriously otherwise. Look at the top table at your company’s AGM, press conference or whatever, and you will see much the same as Mr Leung sees round the Exco conference table: acres of uniform suiting.

The idea that men should dress as if they were going to a funeral actually dates back only to the Victorians. Before then men were expected to be colourful. Those 18th century military uniforms now found only on bandsmen were in their day no more colourful than the civilian stuff. I suspect that like so many Victorian innovations the sober suit was introduced as an antidote to sex.

Advertising desirability Culturally, we tend to behave as if men hunted for wives and women were the passive recipients of their attentions. Biologically, it is the other way round. In other species this is obvious. The reason why the male bird has the colourful plumage and the female is a boring brown shade is because she does not need to advertise. The ladies do the choosing. According to the biologists, this is the case with humans as well. A young male may feel that he walks into the bar, sizes up the prospects, and pursues the one which catches his eye. Close examination of the body language, though, reveals that he goes where he is invited. So the prevalence of funereal male garb is something of a puzzle.

I imagine we would find a good many conspicuous. One does not see grey Ferraris. A man who drives a grey Rolls is saying that, for him, the mating season is over. He is only available as a sugar daddy.

“Strut those uniforms!”

CO-PUBLISHED CORPORATE PROFILE

KVH eyes being Asia’s leading ICT provider KVH plans to expand their core services in Singapore, Hong Kong, China, and Korea by the end of the year.

Jedrey emphasized, “The financial services industry is in our DNA. The way our infrastructure was set up and the way we configured our network was based on Fidelity standards.” KVH is privately owned by FMR LLC and related Fidelity entities, so in some respect, the company is engineered towards serving the financial services industry in terms of security and infrastructure resiliency.

Financial industry expertise KVH prides itself as one of the pioneers in the “low latency network” business serving high frequency trading. Over the last 10 years, the company has gained a solid reputation with a list of loyal clients in key industries including finance, media, and services. Guo notes that more than half of their current customer base is from the global financial services industry, with some being large investment banks.

KVH is also well positioned as a partner with major stock exchanges in the region.

Future plans for Singapore KVH Singapore was established in September 2011 and is currently on track with its expansion plans. William Tay, Country Manager for KVH Singapore notes that the company has aggressive plans to grow outside Japan, and hence has already committed to significant investments into the country. “While we continue to focus on the financial industry, KVH is also currently working to expand its growth in the hightech manufacturing and multimedia market segments.” According to Tay, KVH is well positioned to serve the Asian market especially since their focus is in the region.

Tay also highlights that the company intends to use Singapore as its gateway to expand to other geographical locations in Asia over the next few years. He added, “KVH will continue to bring its expertise in networks, data centers, and managed IT services to firms across Asia.” In fact, by working with Colt (http://www.colt.net), a sister company to KVH operating in Europe, as well as with other global and regional partners, KVH can provide a global network footprint with end-to-end services to serve the needs of multinational companies.

Tay noted, “KVH wants the Singapore market to know that there is a new alternative provider in town, who can offer extremely high quality services.” Guo added, “KVH is already providing managed network and data center services, and by the end of the year, KVH will deploy other core services in Singapore, Hong Kong, China, and Korea.

In 2013, we plan to extend our focus to Australia, India, and key Asian countries.

KVH is committed to serving our regional customers with a new level of customer satisfaction and experience.”

“The financial services industry is in our DNA.”

Sales Hotline (SG) - (65) 6590 9008 Email address - sales_sg@kvh.co.jp

William Tay, Country Manager for KVH Singapore

K

VH (www.kvh.co.jp), a Japan-based IT Services and Communications Provider, talked about their recently established Singapore office, which will serve as their regional hub outside of Japan. KVH delivers integrated IT and Network Solutions to its clients across the Asia Pacific region and offers a holistic solution centered on data centers, managed IT services, and network. KVH EVP for International Division, Guo Zhongmin commented that “the fundamental driver for the company’s success is that they have the components for an information delivery platform that enables effective processing, storing, protecting, and delivering of a corporation’s vital business information.”

Peter Jedrey, KVH VP of Marketing added, “the management of corporate data for CIOs is rapidly increasing in complexity, not only in terms of data growth but also in how data is treated and archived. By leveraging KVH’s IT services, data center facilities, networks, and expertise, corporate CIOs are given peace of mind that their data is secure and that scalable computing resources are available to handle changes in demand.”

The secret to success Guo states that offering high service standards and being an Asia-centric company with a focus on targeted industries have given KVH an advantage of quick decision-making with a customer-intimate approach. “We have in-depth expertise, not just within our own industry, but in our customer’s industry,

which gives us the ability to understand our customer’s needs from their perspective and tailor our solutions to their specific requirements. The key differentiators of KVH versus other players is its ability to understand customer needs, offer high service standards, and its fast and flexible approach in doing business.”

Currently KVH has 500 employees across Asia and has 26 nationalities working within the organisation. Jedrey said, “This illustrates the company’s ability to bridge cultural gaps with their clients. We are a very multinational company, so when foreign companies come into Japan, we are able to interact with them, not just linguistically in their native language, but also culturally, which makes KVH very unique in the market.”

SINGAPORE BUSINESS REVIEW | AUGUST 2012 37

ANALYSIS: ASIA’S RURAL BOOM

Is food inflation a boon or burden to rural Asia?

Economists debate whether rampant food inflation will raise living conditions in the region’s countrysides.

W

hilst inhabitants of Asia’s cities are decrying rising inflation, out in the country sides they are celebrating their new found wealth from agriculture. Far from being a negative, for much of Asia, this recent 2-year bout of inflation, much of which is food related, is helping to spraed the wealth to the poorest parts.

Inflation drives rural boom In effect, farmers are enjoying positive terms of trade shock.

Frederic Neumann, co-head of Asian economics research at HSBC, argues that the real boom lies in rural areas as farmers are able to purchase more in return for their output year after year. As a result, consumption in the countryside is soaring, even if average incomes are still below those in cities.

“High food prices have lifted incomes in the countryside, often at a faster pace than in the cities. This has important implications. First, it adds to wage pressures as migrants 38 SINGAPORE BUSINESS REVIEW | AUGUST 2012

“High food prices have lifted incomes in the countryside, often at a faster pace than in the cities”

require ever higher wages to entice them to industrialized areas. Second, while it helps alleviate inequality between rural and urban areas, it aggravates it in cities. For officials, this means that potential growth rates have slowed, and industrial slack is no longer the best guide for the appropriate monetary stance,” he said. So how much faster are rural incomes growing than city incomes?

In China, by some measures, rural incomes have outpaced urban incomes since 2009, and by an increasing margin over the years, estimates Neumann. ”In Indonesia, per capita consumption in rural areas has risen faster than in cities since 2006, after lagging urban areas for years. In Thailand, though patchy, data also shows faster income growth in the largely rural Northeast than in Greater Bangkok in 2007, and in India,rural areas are seeing burgeoning consumption, a fact that helps to propel overall demand even as the industrial sector looks a little

shaky.”

Some economists, though, remain unconvinced that food inflation is driving Asia’s rural boom. Alaistair Chan, an economist at Moody’s Analytics, notes that many rural dwellers are farmers and so higher food prices mean higher rural incomes. “That said, in China’s case much of the food inflation is due to higher logistics costs, toll charges and so on, so the rural boom has been driven by government investment, rather than rampant food inflation.”

According to BBVA chief economist Alicia Garcia-Herrero, rapid income growth and rising labor costs are the true factors that lift living conditions in rural areas. “Income growth increases demand on food products from rural areas, and rising labor cost can bring more revenues to rural families via remittance from migrant workers. Therefore, we would rather not attribute the increase in living conditions in rural areas to food inflation itself, but rather to the increase in other costs like transportation and fertilizers,” she adds.

But Herrero argues that neither income growth nor rising labor cost would lead to a boom in Asia’s rural areas. “For a rural boom to happen we should see more investment and more productivity gains.” Hyun Son, senior economist at Asian Development Bank’s economics and research department, argues that food inflation proves to be more of a curse than a blessing to poorer households in rural areas. Studies have shown that many rural households in developing countries are actually net food consumers, meaning they consume more food than they produce or sell.

“Our view is that in the long run we can only improve rural incomes by enhancing rural development through investment to improve farm productivity or to promote food processing industries. While rising food prices may favor the agricultural sector and, possibly, help reduce poverty in the short-term, this is neither a sustainable nor a long-term solution to rural poverty,” says Son. When rural and urban meet Neumann also points to the equitable effect of higher food prices, which he notes leads to rising rural incomes

ANALYSIS: ASIA’S RURAL BOOM and have helped reduce the income gap between rural and urban areas.

DBS chief economist Dave Carbon also believes higher food prices can help improve income distribution.

“Higher food prices are an important part of the rebalancing between urban and rural areas. While governments try to keep food prices low, often in the name of the ‘poor’, it really only helps the urban poor. In many countries higher food prices are good for the poor, as many poor reside in rural areas,” he adds. Moody’s Chan believes the income gap reduction has not happened yet but will happen soon. “Inequality remains a big problem in China and urban incomes are rising quickly, so there is still a big gap between urban and rural incomes. But as rural incomes rise, there will be less urban migration,” he adds.

But in order to reduce the urban/ rural income gap, average rural incomes will have to rise faster than urban incomes and this trend has not materialized yet, says Son. She notes that rising food prices affect people’s welfare by weakening purchasing power—simply put, higher food prices will make city dwellers worse off assuming that their incomes stay the same. Moreover, the adverse welfare impact of the high food prices would be more severe on the poor. “It is easy to see how those who spend 80% of their incomes on food will suffer more than those who spend only 20% of their incomes on food.”

In ADB’s recent study on food

security, the impact of rising food prices on poverty in Asia was explored. Son reveals that during the late 2000s four factors led to changes in the number of poor people in the region including population growth which increased the number of poor by 6.5 million; higher food prices which increased the number of poor by 112 million; higher non-food prices that increased the number of poor by 95 million; while there were higher nominal incomes which reduced the number of poor by 244 million. “Therefore, the net effect of these four factors is a reduction in Asia’s poverty headcount by 30 million in the late 2000s.”

Meanwhile, Neumann also notes that the rural boom slows the flow of migrant workers into cities, thus putting upward pressure on wages.

“One salient feature of urban labor markets in recent years has been sharply rising wage costs and, in some cases, lack of available labor, forcing companies even in manpower-abundant China to turn increasingly to factory automation.”

However, Son argues that a rural boom does not necessarily cause wage pressures in cities. She notes that even if we assume that a rural boom is happening, rural wages are still so low compared to those of urban wage rates that we do not expect a significant reduction in rural-to-urban migration. “Rather than rural wage rates, economic growth is the main cause of upward pressures on urban wage rates as

75 Per Median 25 Per

4.0

3.78

3.83

3.46

3.44

3.73

3.74

3.44

3.44

3.15 3.02

3.0

3.38

3.27

3.27 3.15

3.53

3.49

3.39

3.4

2.88

3.74 3.65

3.56

3.6

2.85

4.08

3.85

3.68

3.12

4.07

3.99

3.8

3.2

4.08

2012Q1

4.2

2011Q4

Poverty reduction rates in rural and urban areas (in %)

3.12

3.18

3.21

3.47

3.26

3.01 2.90

2.82

2.8

2012Q2

2011Q3

Source: ADB publication Global Food Price Inflation and Developing Asia.

2011Q2

2011Q1

2010Q4

2010Q3

2010Q2

2010Q1

2009Q4

2.65 2009Q3

2.61 2009Q2

2.6

economic growth increases demand for labor.”

Alaistair Chan

Alicia GarciaHerrero

David Carbon

Hyun Son

Urban-rural rebalancing in Asia BBVA’S Herrero reckons that Asian countries, accounting for one third of the world’s GDP and contributing one half of growth, have come to a crossroads when it should start to rebalance its economy: from export oriented to domestic demand driven, from investment-focused to consumption-focused, and from growth-targeted to one caring more about social welfare. People in the rural areas have improved their living conditions through remittance income. In the same way, cheap labor from the rural labor bolstered economic growth in urban areas.

Herrero notes that in China, 120 million migrant workers from rural and western areas are working in the more industrialized eastern coastal areas.

But according to Chan, the massive urban migration seen in the past few decades is beginning to slow, although the share of urban dwellers as a proportion of the population will continue rising, albeit at a slower pace.

Rural boom still premature Ultimately, Son reckons it is still premature to say that there is a rural boom or urban-rural rebalancing in Asia. From a recent study by ADB on food security and poverty, in India, economic growth between 2004 and 2010 resulted in nearly the same annual rate of poverty reduction in rural (3.96%) and urban areas (3.64%). On the other hand, in Indonesia, economic growth between 2005 and 2010 led to faster poverty reduction in rural areas (5.21% per year) than urban areas (0.36% per year). However, in China, rural poverty decreased at an annual rate of 4.9% between 2005 and 2008, while urban poverty decreased at an annual rate of 15.26% in the same period.

“What the findings from China, India, and Indonesia show is that we cannot say that there is a rural boom or urban-rural rebalancing in Asia even amid rising food prices in the late 2000s. While higher food prices should improve terms of trade and eventually benefit food producers, many other factors come into play to determine rural development.”

SINGAPORE BUSINESS REVIEW | AUGUST 2012 39

PROPERTY

Top residential transactions Locality

Project Name

Developer

Property Type

Total Number of Units in the Project

Units Launched in the month

Median Price ($psf) # in the month

Units Sold in the Month

OCR

RIVER ISLES

Qing jian Realty (Punggol Central) Pte Ltd

Non-Landed

610

442

263

835

OCR

SEA ESTA

Hoi Hup Sunway Pasir Ris Pte Ltd

Non-Landed

376

376

255

906

OCR

WATERCOLOURS

HUGE Development Pte Ltd

Exec Condo

416

416

201

735

OCR

1919

Aurum Land Pte Ltd

Non-Landed

75

75

74

2042

OCR

FLO RESIDENCE

Publique Realty Pte Ltd

Non-Landed

530

33

62

820

OCR

TROPIKA EAST

Feaure (East) Development Pte Ltd

Non-Landed

105

105

59

1312

OCR

THE TAMPINES TRILLIANT

Sim Lian (Tampines EC) Pte Ltd

Exec Condo

670

0

50

812

CCR

THE PALETTE

Hong Realty (Private) Limited

Non-Landed

892

50

44

908

OCR

BARTLEY RESIDENCES

Bartley Development Pte Ltd

Non-Landed

702

0

31

1274

RCR

EIGHT RIVERSUITES

UE Development (Bendemeer) Pte Ltd

Strata-Landed/Non-Landed

862

0

31

1381

OCR

ARCHIPELAGO

United Venture Development (Bedok) Pte Ltd

Strata-Landed/Non-Landed

577

20

30

1089

OCR

1 CANBERRA

MCC Land (Singapore Pte Ltd)

Exec Condo

665

0

29

706

OCR

FLAMINGO VALLEY

FCL Estates Pte Ltd

Non-Landed

393

0

24

1289

OCR

SEAHILL

Boo Han Holdings Pte Ltd

Strata-Landed/Non-Landed

454

0

24

1451

OCR

THE RAINFOREST

Camborne Developments Pte Ltd

Exec Condo

466

0

22

761

OCR

THE PROMENADE@PELIKAT

Oxley Vibes Pte Ltd

Non-Landed

164

0

21

1204

OCR

TWIN WATERFALLS

Punggol Residences Pte Ltd

Exec Condo

728

0

20

742

OCR

HILLSTA

TrustHouse Pte Ltd

Strata-Landed/Non-Landed

416

0

19

1142

OCR

RIPPLE BAY

MCL Land (Pasir Ris) Pte Ltd

Non-Landed

679

0

19

879

OCR

THE LUXURIE

Keppel Land Realty Pte Ltd

Non-Landed

622

0

19

1086

OCR

BLOSSOM RESIDENCES

Grand Isle Holdings Pte Ltd

Exec Condo

602

0

18

706

OCR

CARDIFF RESIDENCE

World Class Developments (Central) Pte Ltd

Non-Landed

163

0

18

1243

OCR

MY MANHATTAN

CEL-Simei Pte Ltd

Non-Landed

301

0

18

1163

OCR

PALM ISLES

FCL Boon Lay v

Non-Landed

429

56

14

906

OCR

EIGHT COURTYARDS

Yishun old Pte Ltd

Non-Landed

654

0

13

813

CCR

8 BASSEIN

World Class Developments (City Central) Pte Ltd

Non-Landed

74

0

12

1992

OCR

FORESQUE RESIDENCES

Wincheer Investment Pte Ltd

Non-Landed

496

11

12

1218

RCR

NESS

Phoenix Land (Singapore) Pte Ltd

Non-Landed

62

0

12

1302

OCR

THE NAUTICAL

Hao Yuan Investment Pte Ltd

Non-Landed

435

0

12

836

OCR

VIBES@UPPER SERANGOON

Oxley Global Pte Ltd

Non-Landed

60

0

12

1267

OCR

THE MILTONIA RESIDENCES

Hoi Hup Sunway Miltonia Pte Ltd

Non-Landed

410

0

11

869

OCR

THE WOODS

Chappells Pte Ltd

Strata-Landed

93

0

11

485

RCR

M66

Agrow Realty Pte Ltd

Non-Landed

70

70

10

1361

OCR

NATURA @ HILLVIEW

Mequity (Hillview) Pte Ltd

Non-Landed

193

10

10

1313

OCR

PARC VERA

Sim Lian (Hougang) Pte Ltd

Non-Landed

452

0

10

871

OCR

RIVERSOUND RESIDENCES

Qing jian Realty (Bengkang) Pte Ltd

Non-Landed

590

0

9

869

OCR

SHIRO

Precise Development Pte Ltd

Non-Landed

16

0

8

1428

CCR

STELLAR RV

Alliance Land Pte Ltd

Non-Landed

120

0

8

2045

OCR

HEDGES PARK CONDOMINIUM

Tripartite Developers Pte Ltd

Non-Landed

501

0

7

903

OCR

SEASTRAND

Precious Sand Pte Ltd

Non-Landed

473

0

7

910

OCR

VACANZA @ EAST

Hoi Hup Sunway Property Pte Ltd

Non-Landed

473

0

7

1052

RCR

REFLECTIONS AT KEPPEL BAY

Keppel Bay Pte Ltd

Non-Landed

1129

0

6

1828

OCR

WATERVIEW

Sim Lian (Tampines One) Pte Ltd

Non-Landed

696

0

6

860

RCR

CITYSCAPE @FARRER PARK

Mergui Development Pte Ltd

Non-Landed

250

0

5

1353

CCR

EON SHENTON

70 Shenton Pte Ltd

Non-Landed

132

0

5

2295

RCR

IDYLLIC SUITES

Hillwood Development Pte Ltd

Non-Landed

71

0

5

1285

RCR

SYCAMORE TREE

Astoria Development Pte Ltd

Non-Landed

96

0

5

1346

CCR

THE TRIZON

Ideal Homes Pte Ltd

Non-Landed

289

0

5

1746

OCR

AUSTVILLE RESIDENCES

MaxLee Development Pte Ltd

Exec Condo

540

0

4

730

OCR

CABANA

Bullon Holdings Pte Ltd & Cabana JV Pte Ltd

Strata-Landed

119

0

4

756

OCR

EUHABITAT

Transurban Properties Pte Ltd

Strata-Landed/Non-Landed

748

15

4

1267

OCR

LA VIDA @ 130

Chahaya Realty

Non-Landed

43

7

4

1227

CCR

MARINA BAY

Marina Bay Suites

Non-Landed

221

16

4

2807 976

OCR

SELETAR VIEW

Asplenium Land Pte Ltd

Non-Landed

276

0

4

RCR

THE INTERLACE

Ankerite Pte Ltd

Non-Landed

1040

0

4

1150

OCR

THE SEAWIND

Bayshore Green Pte Ltd

Strata-Landed/Non-Landed

222

0

4

1528 1576

RCR

CRADELS

Melrose Land Pte Ltd

Non-Landed

125

0

3

OCR

H2O RESIDENCES

Impac Holdings Pte Ltd

Non-Landed

521

0

3

973

RCR

SILVERSCAPE

MM Capital Pte Ltd

Non-Landed

45

0

3

1213 2041

CCR

SKYSUITES @ ANSON

Arcadia Development Pte Ltd

Non-Landed

360

0

3

OCR

THE CANOPY

MCC Land (Singapore Pte Ltd)

Exec Condo

406

0

3

704

OCR

THE HILLIER

Non-Landed

528

0

3

1427

CCR

UP @ ROBERTSON QUAY

Transurban Properties Pte Ltd New Vista Realty Pte Ltd Novel Developments Pte Ltd

Non-Landed

70

0

3

s

Source: Urban Development Authority

40 SINGAPORE BUSINESS REVIEW | AUGUST 2012

PROPERTY

KRISANA GALLEZO

Singapore Permanent Residents slammed by stricter rules on subletting flats

“Only 4% out of the 49,190 flats owned by Singapore PRs are currently subletting their flats” implemented serve as checks to ease citizen’s concerns of PRs utilising their flats as an investment tool,” he said.

Prior to this new regulation, both Singaporeans and PRs could apply to rent out their flat for three years with no restrictions on the period of subletting or the number of renewals. With shorter rental periods, Tan says that the HDB subletting market could see an increase in new leases and renewals upon a quicker expiry period and thus a possibility that there could be more volatility in HDB rents amid a fast-paced rental market.

Additionally, Tan notes that a “two-tier

75 Per Median 25 Per

4.0

3.78

3.83

3.46

3.44

3.73

3.74

3.44

3.44

3.15 3.02

3.0

3.53 3.38

3.27

3.27 3.15

3.49

3.39

3.4

2.88

3.74 3.65

3.56

3.6

2.85

4.08

3.85

3.68

3.12

4.07

3.99

3.8

3.2

4.08

2012Q1

4.2

2011Q4

Price gap between CCR and OCR closing

3.12

3.18

3.21

3.47

3.26

3.01 2.90

2.82

2.8

2012Q2

2011Q3

2011Q2

2011Q1

2010Q4

2010Q3

2010Q2

2010Q1

2009Q4

2.61

2009Q3

2.6

2.65

2009Q2

I

n a new rule released by the Urban Redevelopment Authority in July, Singapore PRs will now find it that much harder to sublet their public flats. Under the new rule, the allowable rental period will be capped to one year, with any applications for extension to be approved on a caseby-case basis. Additionally, the total period for PRs to sublet their flat will be limited to a maximum of five years.

For HDB to restrict PR subletting activities, ECG Property senior district director Eric Tng suspects that there must be a substantial number of PRs doing so. “Personally, I have encountered cases in which the HDB (PR) owner has returned to his country of origin and kept his HDB flat for rental income.

A simple calculation -- a three-room HDB flat selling for $350K and fetching a $2K monthly rental -- tells us that the rental yield for a HDB flat can be easily over 6%. That is a good investment return notwithstanding the capital gains made when sold in a bullish market,” he said. Tng feels that it is a move to further distinguish the benefits of being a Singaporean citizen and a PR. Orange Tee Research & Consultancy director Kok Keong Tan, meanwhile, sees the new measure as simply a way to appease citizens who worry about PRs abusing their privilege to own flats. “HDB data released show that as of April last year, only 4.0% out of the 49,190 flats owned by Singapore PRs are currently subletting their flats. Therefore, a defined ‘two-tier ownership’ scenario and the impact on HDB rents might be minimal. Rather, the new regulations

KRISANA GALLEZO Senior Reporter krisana@charltonmedia.com

Source: Jones LaSalle

ownership” may also arise between owners who are Singaporeans and PRs. “Price-sensitive tenants who are here for a longer stay may prefer to rent a flat from a Singaporean to ease any concerns on rental fluctuations and unsuccessful renewal applications,” he said.

Remax analyst Thomas Tan says the stricter subletting regime is a deliberate reminder from the government to Singapore PRs that HDB resale flats are primarily meant for occupation, not as an investment engine.

“Anyway, less than 5% of the PR HDB flat owners sublet their flats, so it is not an alarming statistic for now. However, the government must have noticed this increasing trend and put this pre-emptive measure in place before things get out of hand. Personally, this move is not surprising as the Ministry of Manpower also announced that from 1st September, work pass holders will have to meet tightened criteria in order to sponsor their dependants so as to ease the pressure on our infrastructure,” he said.

According to Remax’s Tan, rental demand for HDB flats, which are more affordable compared to private properties, always come from work-pass holders and their dependants, hence the measure will complement HDB’s ruling and moderate the overall growth of Singapore’s non-resident population.

“These measures will moderate and stabilise the rental rates of HDB flats as both the supply (from the PRs) and the demand (MOM’s policy) are put in place. Beneficiaries to these measures will be Singaporean owners, whose hearts the government are eager to win,” Tan said.

New rental period cap

SINGAPORE BUSINESS REVIEW | AUGUST 2012 41

OPINION

MARK CHEW 3 mindsets Singaporean employers must change

BY MARK CHEW Founder and Principal Strategist of Giants Learning Technologies Pte. Ltd

A

ccording to a recent news article by Channels News Asia, employee loyalty to their company fell to a five-year low in every major region. And about 52 per cent of employees in Singapore intend to leave their current employers within the next five years. Research also found that about one in three plan to do so within two years!

However it would be unfair to deduce that ‘employees’ are the ones with a problem with loyalty.

It takes two hands to clap. Employers have their own limiting mindsets as well. In this article, let me share with you the 3 mindsets that employers must change.

Employees Show Lesser Loyalty These Days Loyalty is earned. It takes time to inculcate trust and loyalty. Management of various companies must show a concerted effort in employee engagement.

What have you done lately to earn their loyalty?

Was there a proper onboarding process for newly recruited employees?

If the employer lived and breathed only about the short-term results, his employee would be influenced to think that his employer doesn’t care about longterm sustainability. Do you think loyalty can be inculcated this way?

No matter how busy an employer is, take the time to talk to the team. Look at them in the eyes. See if there is fear or hesitancy, then go help them solve their problem.

Employees from Generation X and Y are Really Demanding!

Less than a century ago, it took 14 days for a mail to reach someone. Now it takes less than a mili-second for an e mail to reach another person. And even less

“Get this straight. People want perks.

Not just increase in salaries.” than that for a text message to be sent via phone.

Can you blame this generation for demanding speedier results?

People evolve with technology. And this started when they were young. Children can now pick up an iPhone and learn to use it with such ease.

With such a keen sense of technology, can they fit into your company’s aging system? Even till date, there are still firms who literally ‘cut and paste’ data into their accounting sheets!

Having to work in some companies may be a step back into the past for these employees! Such culture shock doesn’t help in promoting loyalty.

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Having said that, some employees are indeed guilty of being demanding, and yet not performing to their best. The ‘3 Strikes’ policy is sufficed in managing this group of people.

Give them ample time to learn from their mistakes.

Set reasonable goals for them to achieve. And if nothing happens thereafter, have the moral courage to give them the sack.

I think they just want a higher pay!

Get this straight. People want perks. Not just increase in salaries.

In 2011, the top 5 companies that Young Singaporean graduates wanted to work for were, Apple, Google, 3M, Singapore Airlines and Barclays. It’s not surprising that those 2 IT companies were highly sought after. These companies offer plenty of perks!

You don’t need to have a big operating budget like Apple and Google. You just need to know when you can create some excitement in the typical work life. A fun environment can be created when some perks are thrown in to stir up the interest of employees.

A business partner of mine recently bought a laptop to reward his teammate. This is his recognition for the hard work that his teammate had put in the past few months!

There is a greater payoff for the talents in a good physical and human environment. Rival companies cannot easily duplicate such ‘remuneration’ packages because of its spontaneity.

If you demand your team to work late, you better be there with them!

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SINGAPORE BUSINESS REVIEW | AUGUST 2012 43

REGIONAL ECONOMY BRIEFING: INDIA Annual increase of nominal GDP and General Government Debt to GDP

f--Forecast. ©Standard & Poor’s 2012

Liberalize or not?

Liberalise or not?

Debate rages on whether India should undo some progress it had made to liberalise economy.

India enjoyed GDP growth of over 7% on the average in recent years but concerns over its sustainability are now mounting amid a global economic slowdown. Analysts are looking at some policy stagnation risks as the economy dangles within a weak political context. Still on a pessimistic note, Standard & Poor’s (S&P) warns that India might have to go backwards in its economic policies and undo some of the progress it had made to liberalise its economy since the early 1990s.

S&P’s analyst Joydeep Mukherji says such a retreat might be in line with the more interventionist economic policies many developed countries pursued in response to the recent global economic crisis.

The future of economic liberalisation “The combination of a weakening political context for further reform, along with economic deceleration, raises the risk of the government taking some modest steps backward from economic liberalisation in the event of unexpected economic shocks,” he said.

Mukherji cites as example the fact that a growing trade deficit, along with the need to boost fiscal revenues, contributed to the government’s decision to raise minor trade barriers in its recent budget.

Similarly, a widening external deficit, combined with slower growth at home, he says, could tempt the government to modify industrial policies in order to tilt the playing field in favor of domestic producers at the expense of import.

Furthermore, the government had been reducing its equity stake in public sector banks and exposing them to market forces, greater competition, and pressure from minority shareholders from the private sector. However, Mukherji notes that the government has retained majority ownership of those banks, periodically injecting public funds into them to boost their capital levels and sustain 44 SINGAPORE BUSINESS REVIEW | AUGUST 2012

their rapid asset growth.

A persistent slowdown in GDP growth, meanwhile, could result in a rise in nonperforming loans to both public and private sector borrowers, says Mukherji, adding that the government could respond by nudging the public sector banks to respond in a less commercially-oriented manner.

High risk to reform process Other economists however disagree with S&P. Moody’s Analytics senior economist Glenn Levine believes that there is no risk of policy reversal as the benefits from these pro-growth policies have become clear over the past decade. There is, however, a high risk that the reform process will now stall as the political benefits of opposing such legislation have been expertly exploited by the BJP and Mamata Banerjee since the 2009 election.

“The policy stagnation and political stasis of the past three years has deterred both local and foreign investment and crushed business confidence. GDP growth of +8% doesn’t just happen. It needs the correct policy environment in place. And right now the necessary policies and pro-growth mindset just aren’t there,” said Levine of Moody’s.

Coface concurs, saying that it is unlikely considering the positive communications now being heard from the Finance Ministry, i.e., a pledge to allow 49% in aviation and insurance by this financial year-end.

Coface insists there will be slow progress in structural reforms, in the context of a weakened Congress Party after the local elections in March 2012. “There are still governance shortcomings, especially corruption.

Several scandals hit the headlines in 2011, notably about the organisation of the Commonwealth Games and the granting of mobile telephone licenses. The lack of transparency in the financial results of medium-sized businesses and the absence of group consolidated accounts are still worth noting,” said Coface.

According to Coface, external multilateral agencies and governments have been constantly reminding the government of India on the perils of not putting forth economic reforms, easing of monetary policies, and corruption or lack of transparency that have kept foreign institutional investors away.

CO-PUBLISHED CORPORATE PROFILE

Cybercom ensures unmatched online excellence for its clients Cybercom aims to help organisations make the most out of their online presence and digital assets to meet their key performance indicators.

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ince 1995, Cybercom has been delivering outstanding services to its customers and has since developed its expertise in the internet and the web. In Asia Pacific, Cybercom deals with a whole spectrum of organisations from small and medium sized enterprises to multinational companies. These customers have differing levels of maturity and awareness in terms of the concept and value of Online Excellence.

Embracing the challenge According to Teck-Hock Chua, Cybercom’s Senior Business Developer – Digital Solutions, there is a lot of emphasis on driving traffic online and that comes with its own set of problems such as ensuring that their visitors have the best experience that matches, if not exceeds, their offline touch points with these organisations.

All businesses face the challenge of making their websites, online stores, or eCommerce sites a part of an overall Digital Strategy with metrics in place to measure the user experience, conversion rates, and brand perception that should form the basis of any company’s key performance indicators.

As Chua puts it: “An organisation’s website should not just be an information-based corporate website but a business critical tool that will throw up a lot of statistics that, with the formulating of a sound digital strategy, will help the entity in knowing more about the visitors to their site, what they do, why they leave and with these information, the site can be improved in terms of design and architecture of the information provided that will ensure that the visitor has the best experience possible.”

Some organisations may be unaware of the existence of certain challenges and the opportunities that are available. But Chua is confident that the digital landscape here will gain from Cybercom’s experience and offerings.

Solutions at Cybercom With a team of experts, Cybercom helps its clients to formulate a meticulous digital strategy leveraging on the statistics that are drawn from the customer’s site, which rightfully should be a business critical tool, for the customers.

Chua reveals that revamps of organisations’ websites are usually driven by the value judgements of the bosses or the gut feel of the marketing team and without having any fact-based baseline study on the current site and not having any form of metrics of measurement, it may not be known whether the revamp is a step to the right direction or not.

“What we offer, as part of our services, is an evidence-based user perception study on the organisations’ site and/or digital offerings.

Leveraging on a database of more than 300,000 people around the world, we are able to match the demographics that the organisation wants and conduct in-depth studies that will reveal if the site’s features, layout, design, information architecture actually match the customers’ expectations and needs,” says Chua.

Cybercom attempts to alter the largely top-down corporate cultures in the decision-making process to one that is driven by facts and evidence provided by their own prospects and customers. Cybercom provides both quantitative and qualitative results to its clients that explain every user’s behavior and attitude.

Global expertise at work While strengthening its presence on existing Nordic markets, the company also maintains a well-balanced global delivery capability. As an Asia-

Teck-Hock CHUA, Sr. Business Developer – Digital Solutions & Security Pacific example, Chua shares one of Cybercom’s experiences in its pursuit for online excellence for a customer who operates a premium hotel and resorts site that target high net-worth individuals from around the world. The location of its server is in Europe. The rich media that they have on their site makes it hard for a user in, for example, Melbourne, to meet the global standard of having a webpage loaded within two seconds.

Cybercom then ran a series of web performance tests for them and shared with them solutions on how to build and optimise the pages as well as to distribute their load around different geographic regions. “Coinciding with the launch of their new site, the solutions we offered will set a new standard of performance for the organisation and a much better experience for their customers,” adds Chua.

Leveraging on its Nordic experiences, Cybercom’s approach is geared towards making the customers realise the “opportunity to excel” by bringing the best practices from its Scandinavian early-adopter clients such as H&M, Ikea, ASSA Abloy, Sony Ericsson, BAE, NasdaqOMX, Handelsbanken to its customers here in AsiaPacific.

Cybercom Singapore Pte Ltd 133 Cecil Street, #12-04 Keck Seng Tower Singapore 069535 Tel: +65 - 6536 2780 Fax: +65 - 6536 2781 www.Cybercom.com

“Cybercom helps its clients to formulate a meticulous digital strategy leveraging on the statistics that are drawn from the customer’s site” SINGAPORE BUSINESS REVIEW | AUGUST 2012 45

DINING

Singapore’s great steak race

Singapore Business Review brings you the latest and hottest destinations to satisfy your cravings BJ’s American Diner and Grill , Wooloomooloo Steakhouse, and Zafferano Bar & Lounge.

Wooloomooloo Steakhouse brings Hong Kong style to Singapore

Wooloomooloo Steakhouse, an Australian-inspired premium steakhouse from Hong Kong, had just opened its first Singaporean branch on level three of Raffles City Shopping Centre. The spacious 140-seater dining room is home to delectable steak dishes prepared by Head Chef Gerard Lewis.

House specialties include the Tuna and Spanner Crab Tartare with avocado cube base, orange slices, diced shallots and coriander. Other choices for starters are the Jumbo Prawn, Broiled Sea Scallops wrapped in Applewood, Smoked Bacon, Classic Steak Tartare, and Australian Wagyu Beef Tenderloin.

Wooloomooloo’s main menu specials, ranging from $89 to $129, include the Australian Black Angus Tomahawk, Australian Black Angus Wagyu Tomahawk, Australian Black Angus Porterhouse, and the 150-day grain-fed, wet-aged Rib-Eye Steak and Sirloin Steak.

The signature dish, Beef Wellington ($66), is an 8-ounce piece of broiled Australian fillet mignon, paired with Parma ham, mushroom duxelle and 40g of foie gras, encased in a pastry.

BJ’s American Diner and Grill dishes up Americana to go

The Botak Boss is back, and this time he is trying his hand at an all-star American diner, but still in the heartlands and still with the reasonable prices. Of course, we are talking about Bernie Jones, the man behind the brand Botak Jones that got us all excited by the prospect of burgers at the local hawker centre. His new diner is like something you would expect to find on route 66, full of folksy charm, surfboards on the wall, and an open kitchen with a short order chef who is on his way to Hollywood.

So it is fitting that BJ’s American Diner is located on Balestier Road, the Route 66 of Singapore, connecting all sorts of areas and people as it winds its way from the gentrified and glitzy neighbourhood of Thomson, through the lighting shops of Balestier, and on to the KTV Zone near Moulmein, Bernie started over with his wife as his partner and put up Botak Jones, an authentic American food stall in Tuas. The second outlet was opened in a coffee shop in housing estate Ang Mo Kio. In two years, five more branches were put up. One and a half years later, Botak Jones’ 11th outlet was opened. “In July of 2011, a small group of investors became interested in the company and bought over the majority stake. Shortly after they let me buy over the only outlet that was started as a full serve restaurant. Agreements were signed and we changed the name to BJ’s American Diner and Grill,” says Bernie.

BJ’s menu is all-American—heavy on the burgers, steaks, chops and such. For their ribeyes, the restaurant serves New Zealand prime steer and American USDA Certified Black Angus prime. Burgers are ground from the rump section of the steer as it has very little sinew and veins. Another house specialty is the “wild caught” Alaskan Sockeye salmon fillets, which have no chemicals or colorings unlike the very common farmed salmon. The menu also offers US pork loin, and Alaskan red king crab legs among others. BJ’s is located at 312 Balestier Road, open to serve everyone from 11:30 to 11:00 every Tuesdays to Thursdays, 11:30 to 12:00 on Fridays and Saturdays, and 11:00 on Sundays.

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Zafferano Bar & Lounge sets new heights in Singapore Located at the top floor of the Ocean Financial Centre in Collyer Quay, Zafferano Bar & Lounge is set against the Singapore city view, providing a 270-degree view of the island. The Italian bar and lounge offers contemporary takes on traditional Italian cuisine, complemented by Head Chef Roberto De Franco’s dishes.

The menu is divided into seven featured varieties of cuisine - Cucina di Mamma (Mum’s Kitchen), Terra (Earth), Verde (Greens), Mare (Ocean), Griglia (Grilled Meats), Delicate (Delicatessen favourites) and Dolci (Sweets). A range of 40 wines by the glass are also offered, from a collection of over 200 Italian and premium labels. Culinary offerings at Zafferano vary throughout the day, with a semi-buffet lunch, afternoon tea and dinner service served every weekday, while Prosecco is available during Sunday Brunch. There are also two dining areas convertible to one large space for 20 to 30 guests.

SINGAPORE BUSINESS REVIEW | AUGUST 2012 47

LIFE & STYLE

Singapore’s Vintage Havens Visit these vintage retail shops to indulge your love for classic treasure finds and those perfect one-of-a-kind gifts.

Bag Masterpiece

Stanley Street, Singapore, Singapore 068732 The exclusive, free- membership site, Bagmasterpiece. com, is where you can find authentic, never-beforeworn Hermes handbags and couture accessories. All the bags available online and at their store, are preowned yet exude a brand-new quality.

By signing up as a VIP member you can reserve your favorite Birkin online and visit the shop for a viewing before each bag is revealed to the public.You can visit BagMasterpiece at www.bagmasterpiece.com.

ReStore

124 Tanjong Pagar Road, Singapore ReStore is a vintage furniture store-cum-café, where the warm smell of fresh bagels fills the room while you browse through vintage furniture and home wares. All the furniture at ReStore are carefully selected and have been lovingly restored.

With selected pieces, you may find a few with interesting woodwork along with brand new upholstery.

Granny’s Day Out

Coleman Street, #03-25 Peninsula Shopping Centre, Singapore Born out of the love for all things old and special, Granny’s Day Out is nestled in one of Singapore’s oldest shopping malls. With a wide range of women’s vintage clothing, purses, shoes and accessories from the 1920s to 80s. Sourced from around the world, Granny’s Day Out inspires women to treasure the old and embrace the eclectic while staying stylish in the modern sense.

Bras Basah Complex

Blk 233, Bain Street, #04-11, Bras Basah Complex, Singapore Fotographiqa

www.fotographiqa.tumblr.com, info@fotographiqa.com +852 9357-9537 A brainchild from camera geek Jon Maloney, Fotographiqa is refuge for those vintage camera lovers who prefer the look and feel of chrome and leather, and take time to develop their techniques manually and intimately. Expect to find a range of vintage Leica cameras, and if you have a particular model in mind, they will be able to source it for you and deliver to your address in Singapore.

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Bras Basah Complex is a haven for art, music and book lovers. You can find a variety of secondhand bookshops here that can keep you occupied for hours. Visit Evernew Bookstore for a large selection of fiction books, magazines, as well as vintage encyclopedias and computer books.

For a large selection of children books for preschoolers and early primary students, Lido offers interesting items. Bookpoint, is another popular destination to lose yourself in the aisles of history, law and geography books.

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NUMBERS

1 in 10 leaders expect their business to be worse off

16% (53%) Worse

38% (8%) Better

46%

84%

(39%) Same

of business leaders think their business will be the same or better in 2012 (Q3 2011 results in brackets) Source: Ipsos Business Consulting online survey Note: Data are from responses by business executives across all industries

Developing markets in Asia Pacific are more likely to invest in gold/silver or other precious metals

In Asia Pacific, investing in stocks is most prevalent Source: The Nielsen Global Survey Decoding Global Investment Attitude

Budgets are increasing (against 2011 figures in brackets)

Source: The Nielsen Global Survey Decoding Global Investment Attitude

44%

Increased activity for 2012 with a year on year increase in 2009, 2010 and 2011

16%

Increased activity for 2012 but still less than 2011

(4%)

25% Very likely

32% Quite likely

15% Definitely 27% Not very likely 1% Not at all likely

72% are planning on new investments in their business (49% in Q3 2011)

Source: Ipsos Business Consulting online survey Note: Data are from responses by business executives across all industries

(19%)

27%

No change from 2011

(21%)

12% (5%)

Less activity in 2012

Source: Ipsos Business Consulting online survey Note: Data are from responses by business executives across all industries

For more information contact: Ipsos, Tim Hill (tim.hill@ipsos.com) &Tim Hill (tim.hill@ipsos.com); Nielsen, Jackie Helliker (Jackie.Helliker@nielsen.com); Nielsen 50 SINGAPORE BUSINESS REVIEW | AUGUST 2012

Every business has a different story and a different goal. We understand that. Over many years in this market of unique opportunities, we’ve developed the local knowledge, resources and connections needed to turn ambitions into reality. That’s why we’re one of the most well-established northern European banks in the region. For corporates, financial institutions and private banking clients, we’re ready to listen and cater to your needs – in Beijing, Shanghai, Hong Kong, Singapore and New Delhi.

For further information, please call us on +65 6223 5644 or visit sebgroup.com/asia SINGAPORE BUSINESS REVIEW | AUGUST 2012 51

Jon Hicks/Corbis/Scanpix

When it’s time to do business, we’re exceptionally open.

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