Singapore Business Review

Issue No. 56

Display to 30 November 2013 S$5.90

Daily news at www.sbr.com.sg

Singapore’s Best Selling Business Magazine

Property ISSUE A tale of two cities as price gaps hit record highs

LABOUR

SUPPLY SHOCKS LOOM Bankers complain of nightcalls GROWOLD OR DIETRYING

THINK GLOBAL, HIRE LOCAL

DEBT CAPITAL WOES GETTING WORSE

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

FROM THE EDITOR In this issue, we walk you through Singapore’s

Publisher & EDITOR-IN-CHIEF Tim Charlton

slowing manpower supply as sparked by the latest

ASSOCIATE PUBLISHER Laarni Salazar-Navida Assistant Editor Jason Oliver

foreign manpower curbs. Our channel checks with

Art Director Jonn Martin Herman Editorial Assistant Queenie Chan

analysts also give us a glimpse at the growing

Editorial Assistant Alex Wong

retail market in Singapore. With retail giants such as Jem, Vivo City, and Suntec fetching popular

ADVERTISING CONTACTS Laarni Salazar-Navida

brands from the fast fashion scene, will Singapore

lanie@charltonmediamail.com

retail be as vibrant as ever?

Singapore property investors are also in for a treasure-load of information as we delve into the most dangerous risks of investing in the property market, now that it has been whipped by 7 rounds of cooling measures.

ADMINISTRATION Lovelyn Labrador accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@charltonmediamail.com

Our research team had to tirelessly work through checking and vetting a lot of companies to compile another list of the best Singapore firms. In this issue we reveal an inaugural list of the largest architecture firms in Singapore for 2013 based on the number of employed architects. Get a glimpse of who got the top spot.

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This issue of SBR also tackled the alarming issue of an ageing Asian labor pool. You’ll be surprised at how fast emerging Asian countries are graying and how the economies are preparing for a ‘power shift.’

Enjoy reading!

Tim Charlton

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SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 3

CONTENTS

Singapore in danger of a 10 FIRST labour supply shock

STORY 32 CoVER A tale of two cities as price gaps hit record highs

FIRST 10 Bankers complain of night calls

ANALYSIS their debt capital spree?

Widening credit spreads and uncertainty are pushing investors away from funding high-risk corporate bonds towards safer picks.

supply shock

11 How can Singapore telcos monetise data growth?

14 Qantas CFO Narendra Kumar sets Singapore focus on Asian strategy

14 Global Blue office shines bright like a diamond

16 Retail expansion slowing as costs rise

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road 4 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

OPINION

22 Can Asian corporates sustain

10 Singapore in danger of a labour

12 RV Suites costliest shoebox to rent

REPORT 46 THEMATIC Grow old or die trying

28 Power firms to suffer as LNG terminal commences

Singapore power generation firms have long enjoyed improving profits since 2007 due to lack of new capacity addition but this is set to reverse in 2013, warn analysts.

29 Why should Singapore Airlines stick with the Singapore Girl?

37 Is Singapore really heading towards flexible work arrangement now?

43 PR lessons Singaporeans must learn from Marissa Mayer

REGULAR 40 Legal Briefing 42 CMO Briefing 44 CHRO Briefing 50 Dining

For the latest business news from Singapore visit the website

www.sbr.com.sg

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News from sbr.com.sg Daily news from Singapore most read

HR & EDUCATION

Nearly 7 in 10 Singapore firms to go on a hiring spree until December Here are the in-demand posts.

JobsDB announced the findings of its recent Hiring Index Survey, canvassing the opinions of 233 companies in Singapore on their hiring plans and preferences in the coming months.

Among other findings, the survey uncovered that holding a university degree is not the determining factor in securing a job in Singapore.

RESIDENTIAL PROPERTY

FINANCIAL SERVICES

51% of Singapore property buyers are on the prowl for investment Not on the look out for houses to live in. According to iProperty.com, new launches remain by far the first choice, topping existing properties 68% to 22%. Cross referencing this data with URA resale volume data shows market sentiment and market performance are closely correlated.

Roughly 40% of transactions were resale properties, which recently fell to less than 30%.

3 Singapore commercial banks named as World’s Top 10 safest DBS Bank is the highest placing in the 3rd spot.

Global Finance magazine has named the World’s Top 10 Safest Commercial Banks, and three Singapore banks – DBS Bank (3rd), Oversea-Chinese Banking Corp (4th) and United Overseas Bank (5th) -made it to the prestigious list.

Rabobank from the Netherlands topped the list while Canada’s TD Bank Group came in second.

Debunking the 5 common myths of investing

BY CAYDEN CHANG People think that investment is risky business and that only those with good financial knowledge and the financial analysts type can dabble in it. But that is only because a lot of misconceptions and myth have been perpetuated by stories of sudden wealth and massive losses.

8 tips to grow your salary in Singapore today

BY JACKY TAN With the ‘Fair Consideration Framework’ measure recently introduced by the Ministry of Manpower, local and foreign PMEs in Singapore now have a more level playing field. When the competition becomes fairer, competing on the basis of merit will therefore be more emphasized on.

FROM THE BLOG Why Singapore is still ASEAN’s best business hub

BY GREGORY TIRRELL The results of AmCham’s recently published 2014 ASEAN Business Outlook Survey clearly show that U.S. companies remain bullish on growth in Singapore and throughout ASEAN. The ASEAN Business Outlook Survey shares the insights of senior American business leaders located across the ASEAN region.

6 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

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Agenda PEOPLE | PLACES | EVENTS | OPPORTUNITIES

SERVICES

JURONG EASB ACCOLADES The founding vision of East Asia Institute of Management is to be a world-class educational institution. EASB has been awarded the Singapore Quality Class Certification in 2003, 2007 and 2012.

It also received a full 4-year EduTrust Singapore Certification in 2010 and was ranked to have the 3rd most preferred PEI postgraduate degree programmes according to Job Central Survey in 2012.

HOLCIM Growing demand and complexity in construction industry require better solutions to provide better foundation for society’s future.

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The new Centre of Excellence in Singapore aims to further develop application-based innovation and propel the industry towards a more sustainable construction through resource- and energy-efficient solutions.

Visit their website on www.holcim. com.sg or call them at 6265 1933 to explore opportunities for collaboration.

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PRODUCTS

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The Boehringer Ingelheim group of companies´ objectives and beliefs can be summed up in a single phrase: Value through Innovation, the central concept of our corporate vision. Together with our corporate culture concept “Lead & Learn”, this vision is the driver of our corporate culture. Today, the company remains one of the most successful family-owned pharmaceutical companies globally.

JURONG Consultants is the consultancy arm of JURONG International, a multidisciplinary group which provides a strategic suite of design and build, consultancy, and facilities management services to create distinctive buildings and community environments for public and private sector clients throughout Asia and beyond. We currently have representative offices across 10 cities in Singapore, China, India and the Middle East.

8 Jurong Town Hall Road #08-00 The JTC Summit Singapore 609434 Tel : (65) 6267 8333 Fax : (65) 6267 8182 Email: askjc@jurong.com Website:www.juronginternational.com

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FIRST labour growth.

“To the extent to which an aggressive immigration policy had lifted labour inputs and driven growth before, a slowdown in working age population would also drive down potential growth,” he adds.

BANKERS COMPLAIN OF NIGHT CALLS

While most people believe that “money makes the world go round,” workaholic Singaporeans are living proof that money also makes the world sleepless.

Nearly four in 10 financial services employees in Singapore confess to having been woken up during the night by a phone call from a colleague or client, six in 10 have had their annual leave disrupted by work, and nearly eight in 10 have their weekends disrupted by work.

A recent survey by global career site eFinancialCareers reveals that even when they are not in the office, 43% of professionals in financial services are contactable at all times of the day and night, and during their weekends and holidays. Talk about working 24/7!

Sleepless nights Almost 8 in 10 financial services employees in Singapore work over and above their contracted hours to coordinate with offices overseas. This means extending work to very early in the morning and/or well into the late night. In fact, three in 10 people are working 51 to 60 hours a week.

George McFerran, Managing Director APAC at eFinancialCareers, believes that the working culture in Financial Services is closely linked to the market to market nature of the industry. He said: “Financial Services is a truly global industry and many organisations are now operating around the clock. In a hub like Singapore, from where business is being done all over the world, it’s important to coordinate with colleagues overseas. When transactions are taking place in different time zones that can mean working longer hours or always being on call, but we’re also seeing many employers operating global shift systems to ensure 24/7 cover. ” According to the survey results, a quarter (25%) of people working in financial services operate on a shift basis. At the start of their day a colleague in a different country hands over to them, and at the end of the day nearly a quarter (23%) hand over to someone else. The same proportion (23%) say they are employed to work unconventional hours to service clients in different time zones.

10 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Labour force growth to slow

Singapore in danger of a labour supply shock

W

ith no immigration, Singapore’s working age population will shrink beginning 2020, and this looming slowdown can potentially hurt economic growth.

Hak Bin Chua, an ASEAN economist at Bank of America Merrill Lynch (BofAML), says Singapore’s labour force annual growth is estimated to slow to about 1%-2% for the rest of this decade.

Beyond 2020, labour force annual growth will slow even further to 1% as the population ages and the Singaporean workforce plateaus.

Labour force growth will be driven largely by non-residents and slightly by citizens, with negligible contribution from permanent residents.

Chua warns that by the end of this decade, “Singapore will have joined the ranks of Japan, China and Korea; the group of Asian countries with a shrinking labour force.”

What the shock is all about Morgan Stanley analyst Deyi Tan dubs this domestic issue a “labour supply shock.”

An ageing population and a need to wean the economy off foreign labour dependence, given infrastructure and political constraints, have led policymakers to take steps to slow down foreign

Beyond 2020, labor force annual growth will slow even further to +1% as the population ages and the Singaporean workforce plateaus.

Worst of stagflation finally over Despite a looming threat to economic growth, analysts see a silver lining: the worst of stagflation is likely behind Singapore. Tan expects inflation to hover in the mid-2% territory going forward, somewhat higher than the 1.5%-2.0% range seen during the ‘Goldilocks’ period of high growth and extremely benign inflation seen in the run-up to 2007.

He sees growth likely settling at a newer lower normal whilst inflation is likely to trend higher. This is because the still tight labour market and adjustments to a cutback in foreign labour will likely affect labour costs, despite the more subdued growth momentum going forward.

Courtesy of the loose monetary conditions, housing and car transport prices have previously been the two key sources of inflation. However, Tan notes that macroprudential measures in auto finance in terms of loan-tovalue or LTV caps and maximum tenures have led to softening car prices.

“A slower pace of property price rises from the multiple rounds of property cooling measures has also filtered into [consumer price index] CPI with a lag. In addition, the exogenous tightening inflicted from a less easy Fed policy also looks likely to soften property prices further,” adds Tan.

“Labour Supply Shock” from slower immigration

Source: CEIC & Morgan Stanley Research

FIRST The affordability ratio in Singapore is at a mere 1%, meaning a device only accounts for 1% of their annual income.

Singapore telcos upgrade to 4G

How can Singapore telcos monetise data growth?

W

ith more smartphoneenabled Singaporeans spending more time on chat or email rather than voice calls, data revenue is emerging to become the key growth driver for telcos. So how can telcos monetise data growth?

CLSA analyst Clare Chin notes that the higher smartphone penetration rate, upgraded 3G networks, and the supportive market environment will drive growth.

Where does Singapore stand in these prerequisites?

Being the richest country in Southeast Asia, Singapore unsurprisingly has

the region’s highest smartphone penetration rate of 40%. The iPhone 5 and Samsung Galaxy S4, two of the most sought-after smartphones, cost US$550-US$800 for entry level devices. The affordability ratio in Singapore is at a mere 1%, meaning a device only accounts for 1% of buyers’ annual income.

Upgraded 3G networks Telcos need to upgrade their networks from 2G to 3G and 4G, in order to cope with the surge in bandwidth demand from higher data usage. Chin notes that only Singapore has meaningful 4G population

coverage today, at approximately 80%.

“Achieving high population coverage is easy for this small island state.”

Tiered data plans Chin says the third prerequisite for telcos to monetise data is a supportive market environment. This refers specifically to prevailing price and regulatory risks, the two risk factors constantly faced by telcos. Price risk in Singapore has fallen significantly over the last 12 months with all three players gradually moving their postpaid subscribers from unlimited to tiered data plans.

According to OSK-DMG, tiered data plans have contributed to postpaid average revenue per user or ARPU accretions of 1-6% qoq for the telcos. Thirty percent of postpaid subscribers migrated to tiered plans in the second quarter of 2013.

“We believe the adoption rate could well exceed 40% by end-2013 as more LTE devices flood the market,” says OSK-DMG.

Affordability ratio

Source: CLSA

The Chartist: grade b office rents to dip 10% in 2014 It has been another tough quarter for S-REITs as 2Q13 results were broadly in line with margins under pressure from industrial and hospitality, a recurring theme for the last six quarters.

According to CLSA, the tight labour market remains the key culprit, driving up cost pressures for sectors highly dependent on labour- namely hospitality, retail and industrial.

Revenue-wise, DBS said S-REITs’ growth hit 2.9% yoy in 2Q13, with net property income and distributable income continuing on a steady uptrend.

DBS also noted stronger performers were the Industrial REITs, which saw contributions from their newly acquired properties.

DBS predicts that investors are likely to remain risk averse until the uncertainties surrounding cyclical outflows of Fed tapering have been ascertained and clearer structural inflows into Asian economies are seen.

NPI performance (YoY growth)

Sources: CLSA, company data

Net property income margins under pressure for most S-REITs

Sources: CLSA, company data

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 11

FIRST

RV Suites costliest shoebox to rent

STARTUP WATCH

Mind your language

O

ne of the key selling points of any shoebox unit is the location.

Singapore’s central region is home for many tiny homes with about three quarter of the estimated 150 projects comprising shoebox units currently located here, data from Square Foot Research show.

Further, out of the 50 projects completed since 2012, 38 of them are found in the Central Region.

This should not be surprising as the market here is just willing to pay more for smaller units ranging from 300 to 500 sq ft even to as much as $3,400 per square foot (psf) a month.

Higher rental take-up rates Based on the total rental contracts signed in the past 6 quarters, Square Foot Research said that the Central Region, particularly in districts 9 and 10, saw a higher rental take‐up rate based on the number of rental contracts signed versus the estimated number of shoebox units available compared to Outside of Central Region.

Among properties which reported rental transactions over the last six months, RV Suites has the highest average monthly rental for shoebox units at $3,400 psf. 15 of its 96 units are below 500 sq ft in size.

It is interesting to note that the number of rental contracts signed within a year for RV Suites exceeded the number of shoebox units in the project. Square Foot Research

If the shoe fits...

said that this may be due to rental contracts that are short‐term in nature (6 months) that have expired or early termination on rental contracts.

Strong rental demand Whichever the case may be, the research firm said that the high replacement rate is yet another indication that rental demand for such units is strong.

Vivace came next at an average monthly rental of $3,340. Vivace saw a 91% take‐up rate. Vivace has a 85 units in total, 62 are shoebox.

Ryan Rogowski has developed Waygo, an app that combines optical character recognition nd language translation. It currently translates Chinese characters into English text by evaluating images, finding the relevant text, and converting the detected characters into English phrases.

Rogowski claims that when benchmarked against the ABBYY, recognized as a market leader in OCR, their software is five times faster, two times more accurate, and a tenth of the file size.

Waygo has closed US$900,000 in its seed round of funding with 500 Startups, Goldengate Ventures, AngelVest, Gengo, Niket Desai, and Maneesh Arora participating in the investment round.

According to Ragowski, the funding will allow Waygo Translator to improve it’s Chinese to English translation app as well as expand to Japanese and Korean to English and release an Android version. The team decided to first focus in China and East Asia .

Wireless monitoring

Singapore Business Review event

Check out the 7 laws of entrepreneurial success The second installment to Singapore Business Review’s Eminent Speaker Series discussed how aspiring entrepreneurs can succeed and excel in Singapore amidst the intense competition and financial crisis.

Around 50 aspiring entrepreneurs recently learned new tactics and strategies for success as Mark Phooi, Founder & Principal of First Media Design School, shared the 7 Laws of Success that can help entrepreneurs excel in Singapore’s dynamic and highly competitive market. The same laws have seen him overcome all odds and challenges to transform himself and be someone with stature, influence and wealth.

Mark discussed the key driving forces and motivations behind a successful entrepreneur, and uncovered opportunities for startups in Singapore’s neighbouring markets.

He also revealed how cultural immersion is a key ingredient for success when expanding overseas.

For more photos from the event, visit sbr. com.sg

12 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

ConnectedHealth put up an e-health platform, specifically designed to allow caregivers to monitor patients without needing to visit.

According to ConnectedHealth’s CEO Mike Holt, their home diabetes kit, incorporated in the e-health platform, can simplify the collection, analysis and tracking of key medical information for diabetic and prediabetic patients.

The diabetes kit consists of two key components. First, a Health Manager Application, running on an Android mobile phone, captures data from medical devices and transfers the data via the internet to the Connected Health Portal. This portal then securely stores the data and selectively shares Patient Personal Health Records with authorized Caregivers.

ConnectedHealth has so far raised $1.1M through equity and received $300K grants from major investors Koh Boon Hwee, Get2Volume, National research Foundation.

FIRST

Qantas CFO Narendra Kumar sets Singapore focus on Asian strategy

S

ingapore Business Review recently caught up with Narendra Kumar (NK), Chief Financial Officer Qantas International at Qantas Airways. Here’s what he has to say on three pressing issues Qantas is currently facing.

Narendra has had extensive experience in all aspects of the airline industry. This can be attributed to his various roles and responsibilities at Qantas, starting with his first Qantas position in 2001 to his current role as Chief Financial Officer Qantas International.

SBR: Amidst all the negative speculations about Qantas’ Kangaroo route move, is Singapore still important to you?

NK: We have been flying Singapore for 75 years now, and it continues to be an important market and destination for Qantas. In line with the Qantas Group strategy of ‘Growing with Asia’, we are focused on promoting Singapore as a key hub for the region. Qantas also just commemorated the 75th Anniversary of the Empire Flying Boat flights on 4th August 2013.

In March this year we launched a new schedule which concentrates on Asia itself, rather than being based on throughflights to Europe. The new Asia promotes direct services to Asia and onward connections within Asia on Qantas partner airlines.

This was the first step in a phased approach to make Qantas the best choice for customers flying between Asia and

Australia.

Earlier this year, we also unveiled a multi-million dollar investment – the new Qantas Singapore Lounge in Changi Airport.

We’ve received tremendous feedback on the lounge from our passengers travelling to and from Singapore.

SBR: What are your further plans for capacity increase on services between Singapore and Australia?

NK: Our new Asia schedule has delivered better frequencies, connectivity and timings for our customers. We have also increased dedicated capacity by 40 per cent on our services between Singapore and Australia. The joint Qantas and Emirates network into Asia has provided our customers with a fresh set of options, including double daily services to Singapore.

Together, Qantas and Emirates operate a total of 49 flights per week between Singapore and Australia, including double daily services from Singapore to Sydney, Melbourne and Brisbane, on a mix of A330, B747 and B777 aircraft.

Singapore is a very important market for Qantas, so we will continue to review and respond to customer demand for this route.

SBR: The growth of Singapore-Europe traffic has slowed in recent years due to the challenging economic conditions in Europe, but is now getting better. How is Qantas dealing with this?

Narendra Kumar Chief Financial Officer Qantas International

NK: Our global partnership with Emirates has a lot of potential for growth, especially in terms of route networks.

Emirates’ network in Europe is unparalleled, and so is Qantas’ network in Australia.

What we’re working towards for this partnership is to maximise our individual strengths as an airline, and combine them together to provide Qantas and Emirates customers the best product offering in the aviation industry, in terms of flight connections, enhanced customer experience, and an expanded flight network.

OFFICE WATCH

Global Blue office shines bright like a diamond Global Blue decided to integrate diamonds into the design of their office space to represent their logo. Design firm DB&B creatively blended aesthetics with utility to effectively embed the concept of diamonds into the office space design.

Inspired to showcase the brand’s international presence with a ‘diamond,’ DB&B created a longlasting design meant to capture Global Blue’s dynamic brand.

The concept evolved in different façade of a diamond translated as Global Blue’s various operations. Key design element of this space was the angular feature signage wall that runs through the length of the reception, tying the space together.

Thematic privacy decals on meeting rooms’ glass panels further accentuated the idea, resulting into a unifying effect throughout the space..

Colours and lighting were also employed in line with the fresh take on the brand’s dynamic personalities.

14 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Global Blue reception area

Staff recreation area

Meeting rooms

Staff lounge

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FIRST DEAL WATCH

Mayer steers Vinashin scheme

Fast fashion finds its feet

Retail expansion slowing as costs rise

T

he Singapore retail scene remains vibrant with numerous new-to-market brands joining the fray, while traditional high street brands are also exploring the suburban scene to tap into a broader demographic.

DBS Vickers analyst Lock Mun Yee notes that fast fashion and the food and beverage (F&B) industries continue to drive leasing demand.

H&M opened three new outlets: one at VivoCity, another at Jem, and a third 20,000 sq ft outlet at Suntec City.

Meanwhile, high-end bag brand Lana Marks opened its first shop at Marina Bay Sands, and Wisma Atria attracted three new brands, namely Etam, the Hong Kong boutique I.T, and Italian label Lui.Jo, to the market.

The Dining Edition at Marina Square also attracted eight new-toSingapore names such as Lady M Confections, a Menzo Butao ramen outlet as well as Supreme Tastes Jiang Nan Cuisine.

Going suburban Meanwhile, retailers are also looking to increase market share by venturing into suburban locations, according to Lock. At Jem, which opened in Jurong East in June, 59 of its tenants are new to the suburban market.

These include Robinsons, H&M, Victoria’s Secret, Paris Baguette as

16 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

well as Books Kinokuniya, opening its first new Singapore outlet in 14 years. Hillv2 in Seletar will also house a Market Place supermarket and a Dean & Deluca café when it commences operations.

But Lock cautioned that one of the key concerns in the Singapore retail market is rising costs, which could derail retailers’ expansion progress and dampen demand for retail space.

Wary special retailers In its latest report, Savills notes that specialty retailers were generally cautious with their expansion plans and slow to sign on the dotted line.

High occupancy costs and a labour crunch have also prompted retailers to set up online stores, relieving some leasing demand from the brick and mortar space. Going forward, DTZ predicts prime retail rents in Orchard/ Scotts Road will dip marginally in 2H due to supply-side pressure from the completion of new developments.

Both Orchard Gateway and Shaw Centre’s addition and alteration works are expected to be completed later this year, adding 359,000 sq ft (NLA) of retail space, or around 4.5% of the total stock in the area. On an islandwide basis, approximately 71% of the total pipeline supply in 2013, or 1.3 million sq ft (NLA) of retail space is expected to be completed in 2H.

John Marsden, Departmental Managing Partner, Commercial at Mayer Brown, reached an important milestone this year as he led one of the most historical restructuring deals in Asia’s shipping industry.

Asian shipbuilding firm Vinashin successfully entered into consensual arrangements with other domestic and international creditors as part of its overall financial restructuring plan.

The Scheme became necessary due to the creditors of the US$600 million facility being unwilling to accept Vinashin’s debt restructuring proposals.

While it may be a complex deal, Vinashin’s restructuring scheme was a success under Marsden’s expertise who previously handled multijurisdictional transactions in banking, finance, and energy industries.

OUE strikes another M&A

Specialty retailers were generally cautious with their expansion plans and slow to sign on the dotted line.

Teo Yi Jing and partners Koh Tien Gui and Linda Qiao from Rajah & Tann were tapped by OUE in yet another M&A foray with Wah Hin. Involving approximately $120 million, the deal involved the disposal of OUE’s 80% shareholding and Wah Hin’s 20% shareholding in Hotel Investment Limited and the novation of certain shareholders’ loans .

Teo has been practicing in the area of corporate finance, M&As, and general corporate transactions and has been recommended in Capital Markets in The Asia Pacific Legal 500 2013. Commenting on her chosen career, Teo says “the satisfaction for my legal practice comes from sharing the joy when clients achieve their objectives in a transaction.” On the back of this deal she has also acted for various Singapore firms in their rights issue of shares or warrants.

co-published Corporate profile

Celebrating more than two decades of running for cancer research

With one in four Singaporeans dying of cancer, NCCS steps up to raise people’s awareness and gather funds for cancer research through Run For Hope.

B

eing Singapore’s only comprehensive cancer centre, the National Cancer Centre Singapore (NCCS) has through the years evolved to become one of the leading regional centres for the research and treatment of cancer. It has become a national cancer centre in 1999, and has since pioneered the one-stop multi-disciplinary approach, where today the doctors also sub-specialise to have an edge in developing a deeper understanding of the various cancer types.

NCCS engages in research on cancers that are common among Asians. NCCS is firmly positioned at the interface of clinical cancer care and oncology research and has three research divisions- Medical Sciences, Cellular and Molecular Research, and Clinical Trials & Epidemiological Sciences.

NCCS has invested in and continually upgrades its research infrastructure to provide centre-wide support for all researchers. This includes a Biohazard containment facility, a GMP grade facility dedicated to the preparation of clinical grade research material and major shared equipment and two vivaria for small animals i.e. a specific pathogenfree facility and a clean holding room, which are NACLAR-compliant (National Advisory Committee for Laboratory Animal Research), AAALAC accredited (Association for Assessment and Accreditation of Laboratory Animal Care), and are licensed and annually inspected by the Agrifood and Veterinary

Children enjoying Run For Hope 2012

Authority of Singapore.

Contributing to the knowledge frontier Dr Tan Hiang Khoon, Senior Consultant, Surgical Oncology, NCCS & SGG, says they go beyond just providing clinical service and make a contribution to the knowledge frontier of cancer treatment. He notes that what they do requires a very strong philanthropic contribution to enable them to step into the research realm. “We provided more than 60 projects in the last few years, many of which has gone to win competitive grants in Singapore.”

He adds that the other important contribution from philanthropic contribution is the fact that they sometimes needed to invest in research infrastructures. “The funding may or may not come from national grants. But in cases where we have been able to secure donors who believe in what we’re doing, procuring these new technologies allowed us to leapfrog and really propel our research initiatives.”

Tan explains that the NCC Research Fund is used in three ways. First, the seed funding is used to help scientists kick-start worthy and emerging research projects. By so doing,

“We use this funding to enable the continuation of projects which otherwise it has to be terminated.”

Participants enjoyed the scenic route from Run For Hope 2012

they build a track record and would be able to apply for sustainable competitive grants from government agencies. They also have funds to enhance future research, and lastly, the bridging funds that are used between government grant cycles when the need arises, in order to enable scientists to work with productive momentum.

“We use this funding to enable the continuation of projects which otherwise it has to be terminated. Once the projected is terminated it’s very hard to start them again and I think this funding help us to provide continuity,” adds Tan. One in three Singaporeans suffer of cancer and one in four actually dies of the disease. With such a huge demographic impact that cancer has, it is surprising, if not disappointing, that Singapore lacks enough cancer-related charity and fund raising efforts.

Run for Hope Tan reckons, however, the real problem is not all about funds, but about raising the people’s awareness of the importance of cancer-related research. In an attempt to solve this gap, the NCCS, together with Four Seasons Hotel Singapore and Regent Singapore, organizes an annual charity event called Run For Hope to raise awareness and much-needed funds for cancer research. Run for Hope was inaugurated in 1993 by Four Seasons Hotel Singapore and Regent Singapore, making it the single largest fund-raising effort in aid of cancer research here. Since 2008, they have been partnering the National Cancer Centre Singapore (NCCS) to raise funds for the NCC Research Fund, providing for an array of basic, translation and clinical research programmes.

The Four Seasons Hotel Group has been running in support of cancer research for 20 years now and to celebrate this milestone, Run for Hope will have a new route in Central Singapore. The event however maintains its tradition as a non-competitive leisure run. In 2012, around 10,000 people joined the event.

This year, they are targeting about 15,000.

According to Tan, Run for Hope is not organized solely for the amount that will be raised from it. “We are talking about 15,000 runners that will know about what we do. It’s sort of a self-selected audience. We see it as a way to reach out to the community - both public and corporate.

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 17

FIRST NUMBERS

THE ASIAN MOBILE CONSUMER DECODED

How do Singaporeans compare with their neighbours when it comes to mobile phone and tablet ownership?

Multiple handset ownership in Asia Pacific

Budget buffet binging

The 10 cheapest buffet lunches Singaporeans must check out

S

ingaporeans just love a good lunch, and when it’s a bargain it tastes even better. So Singapore Business Review teamed up with Asiarooms.com, a travel accommodation site in Asia, to come up with a list of 10 hotels in Singapore offering most affordable buffet lunches.

Lunch for each hotel usually starts from 12:00 noon to 2:30pm. Topping the list is River Garden Coffee House at Riverview Hotel with buffet lunch costing $34.80 only. Diners can enjoy local and Western food specialties overlooking the Singapore River.

Straits Cafe at Rendezvous Grand Hotel came next with buffet lunch at $42. Treat yourself with Singapore favourites including laksa and popiah.

Three hotels tied at 3rd place Carousel at Royal Plaza on Scotts, The Dining Room at Sheraton Towers, and Orchard Café at the second level of Orchard Hotel. They all offer buffet lunches for $46.

Mouth-watering selections Orchard Café welcomed its new executive chef Paul Then last July with his signature Straits Chinese delicacies.

Carousel is perfect for seafood lovers. Find your choice from the sushi bar with artfully arranged sushi and sashimi. Food served at Carousel is prepared in Halal-certified kitchens. The Dining Room features international spread and Asian exotics, Western cuisines and local

18 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

favourites.

Triple Three at Mandarin Orchard and Basilico at Regent Singapore came next with buffet lunches being offered for $48. Named after the address of the hotel – 333 Orchard Road, Triple Three features 8 culinary stations and a plethora of Asian and international delicacies. Highlights include sashimi and garden-fresh salads, sushi, tempura and teppanyaki specials. It also features premium roast section, fresh seafood, Asian wok-fried favorites, piquant Indian dishes and mouth-watering desserts.

Basilico is an Italian restaurant which highlights a rotisserie, espresso bar, walk-in wine cellar and with alfresco style-dining available at the terrace overlooking the pool.

Budget-friendly buffet The Line at Shangri-La Hotel was ranked fifth with buffet lunch priced at $49. International cuisine is featured at 16 theatre kitchens, while the bar offers a large selection of premium wines, juices and smoothies.

Marriott Café at Singapore Marriott Hotel, offering buffet lunch for $50, came in sixth. The restaurant, which requires smart casual dress code, features fresh seafood, various live cooking stations and salad bar.

Completing the list is Prego at Fairmont at $68 but unlike the 9 others mentioned above, this Italian restaurant only offers buffet during Sundays.

Tablet ownership, 2013 compared to 2012

Source: Nielsen Holdings N.V.

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ollaboration To find out more, call our Business Banking Commercial Service Centre at (65) 6538 1111 or visit www.ocbc.com

Best SME Banking International Excellence in Retail Financial Services Awards The Asian Banker – 2012

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ASEAN SME Bank of the Year Asian Banking and Finance – 2011-2013

Best SME Bank in Singapore Global Banking & Finance Review – 2012, 2013 Alpha Southeast Asia – 2010, 2011, 2013

FIRST The Analysts’ call

What is UOB’s strategy to become Thailand’s biggest small bank?

OCBC - Carmen Lee

Building a branch in Bangkok

Why UOB is treading cautiously in Thai territory

B

angkok may be a long way from Buangkok, and as UOB is finding out, building a banking franchise in Thailand is a lot different to Singapore. Analysts are concerned that Thailand has built up a consumer debt based on populist policies but UOB still dares to expand its exposure in the country as it aspires to enter the mid-sized league of Bank of Ayudhya, Thanachart Bank, and

We think that the Thai operations are still sub-scale but are on the right track.

TMB. UOB Thailand is the largest among the small banks in Thailand, with a similar number of branches to CIMB Thai but more branches than HSBC, Standard Chartered and ICBC. UOB Thailand currently has around 156 branches, 358 ATMs, and employs about 4200 people as of June 2013. UOB’s optimism about its business, presence, and growth in Thailand is supported by rising regional trades (trade financing), transactional banking activities, and the trend of more Thai corporates and SMEs growing outside of the domestic market, according to OCBC analyst Carmen Lee. “The emphasis on quality new clients and its prudent credit criteria 20 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

have enabled its Thai operation to enjoy reasonable margin and volume, both from retail and SME clients.

The main products are consumer loans, SME loans, trade-related products/services, and cross border transactions advisory/structuring services,” adds Lee. CIMB analyst Kenneth Ng notes that UOB’s strategy is not to compete with the large local banks, but to focus on the affluent consumer segment and to bank on its regional platform in serving corporates and SMEs. He adds that UOB Thai currently generates 4.2% of group pretax profit. It has 2.4%-3.0% deposit and loan market share but the bank aims to double its market share to ~4% in 2015. “We think that the Thai operations are still sub-scale but are on the right track,” says Ng. UOB’s Thailand presence started with the acquisition of Radanasin Bank following the post-Asian financial crisis. The subsequent Bank of Asia acquisition in 2004, propelled UOB to its current position as the eighth largest bank in Thailand.

“UOB has been relatively slow and conservative in building both its Thai and Indonesian franchises, which turns out to be positive now that Indonesia faces major macro headwinds and Thailand is slowing down. It will not be easy for UOB Thai to grow into the size of BAY and TBANK unless there are franchises to buy in the coming years,” says Ng.

Management intends to be a medium-sized bank in Thailand. Some of the key areas of emphasis include PFS (growing its market share for deposits, credit cards, personal loans, housing loans, etc), Corporates and SMEs. The former is also seen in the rise in the number of privilege banking clients - 11,462 with AUM of THB115.3b in FY12 to 12,996 with AUM of THB121.3b in 1H13. The SME market is dominated by family businesses doing domestic business, and could benefit from imports/ exports growth and higher trade activities.

CIMB - Kenneth Ng

Management emphasised that UOB Thai was not going to be all things to all people and it was not going to compete in the league of the large local banks. UOB Thai has a focused strategy, concentrating on: 1) the upper-tier retail segment, 2) the SMEs, and 3) the cross-border transactions of large corporate clients.

UOB Thai views StanChart, HSBC, CIMB and ICBC as its key competitors in Thailand.

The examples of its focused strategy across divisions include: 1) In the personal financial services space, UOB believes that its key competitive advantage in mortgages is its fast turnaround time. The origins of its Thai mortgage business stem from serving UOB Singapore Privilege Banking clients’ demand for investment property.

2) In the SME segment, the six local banks dominate 90% of the market. KBANK is the leader. This is an attractive segment as loan yields can be as high as 6-7%. As such, UOB Thai is certainly interested to increase its presence in this space. UOB sees low risk in this segment (credit costs at 30-40bp of loans) as 48% of its loans were for working capital purposes, while the other lending is typically collateralised or matched with a credit guarantee by the Bank of Thailand.

3) In the commercial and corporate banking segments, the strength of the Thai franchise is its ability to capitalise on its regional franchise and provide a differentiated offering.

CO-PUBLISHED CORPORATE PROFILE

What you need to know about the Antistax Vanity Leg Box

Boehringer Ingelheim’s newest offering is highly suited for ladies who wish to maintain great legs amidst their busy lifestyles.

B

oehringer Ingelheim has been delivering ground-breaking innovations to the pharmaceutical market for 128 years now, bringing tremendous impact with every product launch. Founded in 1885 by German entrepreneur Albert Boehringer, the company remains one of the most successful family-owned pharmaceutical companies globally.

The company lives by the principle of bringing “Value through Innovation.”

It has paid careful attention to having a strong foundation in research and development, which continues to be the major driver of innovative, new medicines for the treatment or prevention of diseases with an unmet therapeutic need.

Common leg issues Boehringer Ingelheim recently launched the Antistax campaign that aims to promote healthy legs for women.

Common leg issues occur as a result of excessive pooling of the blood in the leg veins and a build up of fluid inside the tissues. For instance, a common vein disorder is varicose veins. The word “varicose” means “swollen” and characterises the most common form of the superficial veins. These “varicose veins” are the result of the dilation and bulging of a normal vein in the superficial venous system.

Common leg issues include having heavy, tired legs; experiencing pain both inside and outside the legs (achy legs); having legs that are more puffy than usual; feeling a tingling sensation in the legs; a spasm of leg muscles that often happens at night and can be very painful (calf cramps); and both knees and ankles feeling sore when standing, moving around or when touched.

Boehringer Ingelheim surveyed some women and the results revealed that the most common ailments that they suffer are tired legs (28%), achy legs (24%), heavy legs (21%), knee problems (19%), leg cramps (17%), and swollen legs (12%). But how exactly do these

leg problems impact daily life? One in four women who take their leg problems more seriously revealed that if their legs do not feel well, they don’t feel well altogether. It was discovered that Mexican women suffer the most from this condition followed by German women. Meanwhile, only 16% of women totally agreed to accept leg problems as part of daily life. Reinforcing the fact that the majority of women do not want to put up with their leg problems, or let them influence their daily activities. With more women from across all countries suffering from these ailments, Boehringer Ingelheim steps up with an innovative product set.

Antistax Vanity Leg Box Antistax products all contain bio-active Flaven, an extract scientifically proven to help maintain healthy leg vein circulation as well as reduce pain and swelling noticeably. The Antistax Leg Cooling Gel comes in a pack size of 125ml tubes and has a comforting, cooling and soothing effect on the legs. It also stimulates the microcirculation, especially when gently massaged onto the skin, preferably from the ankles towards the top of the leg.

The Antistax Healthy Active Leg Tablets, which come in packs of 30s, are a food supplement and considered to be a powerful antioxidant that will strengthen and protect veins from the inside. When taken every day as part of a well-balanced diet and active lifestyle, the easy-to-swallow tablets may help avoid the feelings of aching, heavy and tired legs that are often brought on by standing or sitting for long periods of time. One Antistax tablet contains as much bio-active Flaven as you would get from three bottles of red wine.

As Boehringer Ingelheim innovates

“Boehringer Ingelheim recently launched the Antistax campaign that aims to promote healthy legs for women.”

Leg Vanity Box even further, the Antistax Vanity Leg Box was conceived. It contains one box of Antistax Cooling Leg Gel, 1 box of Antistax Tablets (30s), one nail file, and one nail wrap for toes and fingers. The Antistax leg vanity box is a premium set designed to provide total wellness and beauty for our customers, from leg to toes. The handy set includes the Antistax starter kit with a stylish nail file and nail wrap - highly suited for ladies who wish to maintain great legs amidst their busy lifestyles. This limited edition collectible comes in a chic shade of pink; and it is a thoughtful gift set that customers could buy for their family, friends and colleagues for birthdays, seasons of giving & other special occasions.

Apart from these innovative products, Boehringer Ingelheim reminds women of some useful tips for healthy legs.

Whilst sitting or standing, women can raise their legs, rotate their toes and move your feet backwards and forwards as much as possible. A five-minute leg exercise every hour is also strongly recommended. It is also important to always sit straight, with both feet on the ground, avoiding crossing the legs or slouching.

FINANCIAL INSIGHT

Securing debt capital becomes harder

Can Asian corporates sustain their debt capital spree?

Widening credit spreads and uncertainty are pushing investors away from funding high-risk corporate bonds towards safer picks.

E

ven as debt capital market, or DCM, volume in the region remained at par in 2013, Asia Pacific firms may soon find it harder to secure debt capital due to shifts in international macroeconomic policy.

The foremost of these is the looming winding down by the US Federal Reserve of its quantitative easing programme. The investor recoil has already begun in recent weeks with emerging markets being hit the hardest, according to analysts.

“India and Indonesia bore the brunt of the pressure as investors retreated from countries with big current account deficits; the Philippines and Malaysia were also affected,” said Richard Turner, managing director, head of investors, Thomson Reuters, Asia.

“As credit spreads widened, local currencies and stocks fell, investors are starting to become more cautious toward companies in the region that 22 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Investors are now developing a lower risk appetite, and will soon shift their preference from highyield corporate bonds to lowerrisk investmentgrade sector issues.

have come to depend on regular access to the capital markets after a funding spree in recent years. Asian corporates, thanks to easy access to cheap money in the recent past, have accumulated a steady rise in debt and as a result now hold among the most heavily leveraged balance sheets globally.”

Risky corporate debt has been accumulating briskly since 2009, when Asia Pacific high yield corporate bond proceeds stood at just $1.3 bn before ballooning to a record $19.9bn in 2011. Volume crashed in 2012 to $8.8bn but rebounded strongly to $16.6bn in 2013.

Lower risk appetite Turner said investors are now developing a lower risk appetite, and will soon shift their preference from high-yield corporate bonds to lowerrisk investment-grade sector issues in developed markets such as South

Korea, Hong Kong and Singapore.

Sovereign bonds will also become more appealing as an alternative for investors seeking safer havens.

“Meanwhile, high yield bonds (bonds not rated as investment grade) in Asia will likely come under pressure as Asia heads to slower growth and tighter credit availability, which will negatively impact already highly leveraged balance sheets.

Meanwhile, as banks in the region continue to tighten their lending standards, higher default rates and forced supply pressures in corporate bond markets may come into play,” said Turner.

Among Asian developed markets, South Korea seems to appeal the most to investors.

“The shift to more developed markets is seeing South Korea once again dominate the flow of new US dollar bonds from Asia, with policy banks and power companies especially keen to refinance their maturing debt,” said Turner.

Investment-grade issuers, wary of impending rate increases, have been recently rushing to secure deals.

Turner cited Thailand’s PTT Exploration and Production raising US$500m on 9 September, and the

FINANCIAL INSIGHT rumoured capital raising efforts of Chinese lender ICBC’s Hong Kong unit. Meanwhile, high-yield corporate issuers are resorting to bank guarantees to lower their risk and attract cautious investors.

“Car dealer China ZhengTong Auto Services used a guarantee from Bank of China to lure investors to its first US dollar bond, a US$335m fiveyear rated BBB+, five notches higher than ZhengTong’s own BB – rating,” said Turner.

Signs of this waning bond investor appetite could also be seen in the region’s relatively slower DCM volume growth.

Asia Pacific (ex Japan) DCM during the first half of 2013 (1H 2013) stood at $509.7bn or just on par with the first half of 2012 (1H 2012), according to latest Dealogic data. This is despite 1H 2013 seeing 200 more deals than the previous period.

China leads, Southeast declines In the Asia Pacific (ex Japan) region, China continued to lead in volume in 1H 2013, with India and Thailand growing fast. Australia and the rest of Southeast Asia, however, suffered contractions.

China DCM volume led the region with a 1H record volume of $232.4bn, up 19% from $196.2bn raised in 1H 2012, and its highest 1H volume and activity ever. China DCM volume now constitutes 45% of the total volume in the region, as companies in the Mainland look to fund their business expansion nationally and globally.

China Development Bank Corp handled the largest share of DCM volume at 7% amounting to $16.2bn, followed by CITIC Securities (5.7%, $13.2bn) and ICBC (5.4%, $12.6bn).

Notably, China high-yield DCM volume also reached $12.2bn in 1H 2013 via 35 deals, the highest semiannual volume and activity on record.

This is more than double the $5.9bn volume seen in 2H 2012 via 17 deals.

While China leads the region in volume, India has one of the fastestgrowing markets. India DCM volume spiked to $33.1bn via 291 deals in 1H 2013, up 56% on the $21.2bn (232 deals) raised during 1H 2012 and the highest 1H volume on record, Dealogic data revealed.

International DCM volume reached $11.3bn via 25 deals in 1H 2013 – the highest 1H volume and deal activity on record and more than quadruple the $2.6bn in the same 2012 period. AXIS Bank took on the largest share of DCM volume at 11.8% amounting to $3.9bn, trailed

by Standard Chartered Bank (8.3%, $2.76bn) and ICICI Bank (8.3%, $2.76bn).

Along with India, Thailand also saw a volume increase in 1H 2013 of 44% to $12.2bn from $8.5bn in the same 2012 period. But overall, the South East Asia region seems to be losing funding momentum fast. South East Asia DCM volume dropped to $53.8bn in 1H 2013, which represents a 23% dip from the same half-year period in 2012 when it issued $70.1bn.

HSBC led the South East Asia bookrunners, snagging a 7.9% share amounting to $4.2bn, followed closely

by Standard Chartered Bank (7.7%, $4.2bn) and Goldman Sachs (6.8%, $3.7bn).

Australian activity declines Australia, too, saw its DCM activity decline, which while not as steep as the dip in South East Asia, has brought it to near-term record lows.

Australia DCM volume dropped 13% to $88.8bn in 1H 2013 from the $102.6bn issued in 1H 2012, the lowest 1H level since 2010 ($67.1bn).

Westpac handled the largest share of Australia DCM volume at 13.5%, equivalent to roughly $12bn, with CBA (10.8%, $9.6bn) and Citi (9.7%, $8.6bn) taking up the second and third positions, respectively.

Mike Bass, Head of Financial Markets, Asia - based in Singapore, says that Westpac is bullish that DCM in Asia will remain buoyant in the near term. This sense for the opportunity is based on the growth of savings invested into the funds sector.

“Funds are the natural providers of long term capital to the corporate sector, with banks playing an essential role in the relationship as an intermediary through debt capital markets. The opportunity has evolved further with challenges in the form of capital and regulatory requirements on banks, as well as investors not having a multi-faceted relationship

Mike Bass

Richard Turner

with the borrower,” he said.

Bass notes that around 45% of borrowers currently obtain their funding from debt capital markets and – this is expected to increase further.

“In Asia, we are seeing more opportunities to bring investors in to participate in deals. A major inhibitor in the past was that structured products have been too complex, which has meant Asian investors only had sporadic involvement in deals. We are overcoming this by establishing intimate knowledge and multi-faceted relationships with the borrowers as well as leveraging our institutional research insights, to better match funding needs with debt market appetite,” Bass added.

Japan DCM deteriorates Meanwhile, Japan DCM volume also deteriorated, dipping to $76.9bn via 238 deals in 2Q 2013, its third consecutive quarterly volume drop.

But Dealogic noted that this was actually up 8% on 2Q 2012 and surpassed 2Q 2009 ($73.2bn via 195 deals) as the highest 2Q volume on record.

Mizuho dominated the bookrunner rankings list with 23.1% or $35.9bn in the 1H 2013. Nomura is at a relatively distant second with 17.1% amounting to a $26.5bn value, followed by Morgan Stanley with 12.6% equivalent to $19.6bn.

While DCM volume slipped somewhat, Japanese corporate bond activities in were on the rise during this period, partially offsetting the weaker overall Japanese debt market environment, said Thomson Reuters.

Proceeds increased by 23.8% to ¥4.9 trillion from 209 deals compared to the same period last year.

Asia Pacific (ex Japan) DCM Issuance

Sources: Urban redevelopment authority, Knight research

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 23

feature: Executive Education

Grooming the next gen of business leaders Two of the best business schools in Singapore offer unparalleled learning experiences.

F

ounded in 1907 in Paris, ESSEC Business School has been developing a unique learning model based on its core values: innovation, openness, responsibility and excellence. As a leading European academic institution, ESSEC offers a comprehensive range of programs (Ph.D., EMBA and Executive programs, MBAs, MSc. in Management, Advanced Masters, BBA) which are ranked among the world’s best and focus on developing the creativity and multicultural mindset of individuals. With the expertise of a renowned faculty, the school delivers premier education and executive programs designed to empower decision makers to meet the challenges of a fast-changing world.

Strategically headquartered in Singapore, ESSEC Asia-Pacific opened in 2005 and has since welcomed more than 3,000 students and managers from all over the world. Singapore’s infrastructural strength and its esteemed position as the regional hub for business, finance and cultural exchange, enable ESSEC to respond quickly to the increasing demand for management education in Asia.

Through its inspiring programs, the school aims to mentor and groom a new generation of leaders and professionals who can take on the challenges of today’s world. ESSEC Asia-Pacific has introduced numerous graduate programs with Asian insights and European perspectives, such

as the Advanced Master in Financial Techniques which is ranked 2nd worldwide by the Financial Times, and the Master of Science in Management ranked 8th worldwide by the Financial Times.

Professor Hervé Mathe, Dean of ESSEC Asia-Pacific, adds that: “Integrating social sciences into the curriculum, reintroducing emotional intelligence in decision-making processes, extending the creative ability of managers, and running consulting projects for the good of the public, are just a few of the initiatives we have taken to manage the need to reinvent business education today.” ESSEC Asia-Pacific leads key research projects and helps enhance management education in areas such as digital marketing, financial modelling, health economics and management, innovation strategies, leadership, negotiation, supply chain management, halal business and real estate finance.

To create and disseminate knowledge in targeted fields, the school relies on several research centres, including the Institute for Research and Education

“The school aims to mentor and groom a new generation of leaders and professionals who can take on the challenges of today’s world.”

on Negotiation Asia-Pacific (IRENE AsiaPacific), the Institute of Health Economics and Management Asia-Pacific (IHEM AsiaPacific), and the Institute for Strategic Innovation and Services Asia-Pacific (ISIS Asia-Pacific). These research centres provide platforms that bring policy makers, industry experts and academics together to drive research initiatives, develop new concepts and share best practices.

The ever-changing business environment makes it essential for professionals to be equipped with the skills and knowledge to excel in the workplace. Therefore, the portfolio of open-enrollment Executive Workshops, advanced management and customized programs offered by ESSEC Asia-Pacific keeps top executives, managers and government officers ahead of business trends, stimulating creativity and enabling them to meet their development objectives.

Covering issues such as social media and digital marketing, negotiation, business model and service innovation, crosscultural team leadership, luxury brand management, halal business and health technology assessment, the Executive programs have been designed to meet needs of organizations and individuals.

Companies in the Asia-Pacific region have begun to see the need for executives to be equipped with the latest knowledge and skills to understand the nuances

ESSEC Asia-Pacific

feature: professional services

NUS Business School, Singapore of different business cultures and keep up with business trends. With this in mind, ESSEC Asia-Pacific developed the ESSEC Executive MBA Asia-Pacific which will start its first intake in Singapore in October 2014. The ESSEC Executive MBA Asia-Pacific will equip managers with cutting-edge knowledge in key areas of management and personal development, allowing them to develop a global perspective of business cultures with residencies in China and the United States. Benefiting from ESSEC’s faculty contributions and its network of regional academic and corporate partners, the program analyses the region in all aspects, from Bottom of the Pyramid implications to wealth management issues, Islamic business management or the Big Data phenomenon.

ESSEC Asia-Pacific will continue to deploy its development strategy along four main thrusts - continuation of efforts to create and disseminate knowledge; forging closer ties with corporate partners; expanding its range of graduate and post-graduate programs; and, reinforcing research and learning partnerships with regional academic institutions. ESSEC Business School is listed in top global rankings and is accredited by AACSB and EQUIS. ESSEC Asia-Pacific 100 Victoria Street National Library Building #13-02 Singapore 188064

Tel: + 65 6884 9780 Email: essecasia@essec.edu Website: www.essec.edu/asia Join ESSEC Asia-Pacific’s community: LinkedIn Group: ESSEC Asia-Pacific Facebook: ESSEC Asia-Pacific Twitter: @ESSEC_AP NUS Business School Since 1981, NUS Business School has offered a comprehensive portfolio of executive education programmes to more than 24,000 leaders and senior managers from over 80 countries. Its range of openenrolment programmes, conducted in both English and Mandarin, are designed for high potential leaders and senior managers.

The school also designs and delivers customised executive programmes targeted at the development needs of client organisations. Its programmes have been delivered in cities such as Singapore, Kuala Lumpur, Bangalore, Bangkok, Jakarta, Manila, Colombo, Shanghai, Beijing, Tokyo, Sydney and Wellington.

Its Teaching Methodology NUS Business School utilises a unique set of academic methodologies to deliver to

“The school is known for its world-class faculty, high-impact research and innovative teaching.”

its participants an unparalleled learning experience. This includes: · A blend of case studies and business simulations delivering content in an experiential format. · Peer learning and cross-cultural sharing via small group discussions, projects and presentations. · Content that addresses current marketplace realities as well as future requirements and trends that can affect competitive advantage.

A variety of assessment and profiling tools are also integrated into the programmes to provide a multidimensional learning experience for each participant. Facilitators work with participants to provide impartial and objective assessments and action plans.

International Faculty – Best of East and West NUS Business School has a 150-strong faculty with members from more than 25 countries. Its faculty members are of the highest calibre, and are actively engaged in research and teaching, as well as consulting to businesses and governments worldwide.

Executive Education NUS Business School Mochtar Riady Building, Level 5 15 Kent Ridge Drive, Singapore 119245 Email: exec_edu@nus.edu.sg Tel: +65 6516 7872 Website: executive-education.nus.edu

CO-PUBLISHED CORPORATE PROFILE

Nastrac soars with a great spirit of entrepreneurship and empowerment See how Nastrac has grown from a company established in a garage in 1997 to a tremendously successful global recruitment firm.

N

astrac is now known as a boutique executive search and recruitment firm working on a personalised and customisable manner with its clients and candidates. But like every business endeavor, Nastrac has its own humble beginnings before it reached success.

Nastrac focuses on strategic and leadership hiring for its clients who are primarily within the Technology and banking industries in mid to senior level positions. Nastrac also has a subsidiary called Rec2rec which specialises in recruiting recruiters and HR professionals for other recruitment and search firms.

Rec2rec was the first company of its type to be setup in Singapore in 2006.

Nastrac serves its clients in a consultative advisory role, offering hiring services across the globe to them. Each assignment is approached with with a balance of strategic methodologies, which include extensive networking, database file search and systematic headhunting.

The company has focused practises for each industry and each of these practises

Nina Alag Suri Nastrac’s Founder, President and CEO 26 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

is headed by a Director who has sufficient number of years of experience in the specific domain as well as in executive search business.

Humble beginnings Nastrac’s founder, president and CEO Nina Alag Suri fondly shares that Nastrac’s first office was established in her garage with just an initial investment of $1000 and 100% investment of her strong belief in herself. The first office was in India and this was followed by an office in Finland and subsequently in UK by 2000. With one office funding the next, Nastrac has grown tremendously and it currently operates out of the most developed markets in Asia,

“I have a lot of empathy with young mothers and Nastrac is a strong supporter of flexi timing and work from home model. ”

Asia Pacific, UK, Europe, and now also in USA. Nastrac’s global footprint is a huge strength and helps service clients who are usually multinationals across most of their offices.

After having worked my initial few years in the corporate world, Suri reveals that she felt a strong need to create a free thinking and autonomous environment where she could explore her full potential and be rewarded in direct proportion to her efforts.

“I wanted to make a difference to myself as well as to the world around me and with my strong desire to be a creator rather than a follower I setup Nastrac in 1997.”

“I also wanted to work in such a way that I could have a good balance between home and work and am able to dedicate quality time to my kids who were very young at that time. Creating my own company gave me flexibility around working hours although I worked much longer hours than I ever did in any jobs!

But it was all around my convenience.

Hence even today I have a lot of empathy with young mothers and Nastrac is a strong supporter of flexi timing and work from home model,” says Suri.

Suri’s excellent enterprising spirit earned her the “Most Promising Entrepreneurship Awards 2013” from Enterprise Asia - Asia’s foremost NGO for entrepreneurship. The winners of this award are all entrepreneurs who share Enterprise Asia’s founding pillars of responsible entrepreneurship and investment in people and are beacons of entrepreneurship in their respective countries.

“I think the fact that this business was started with nearly no investment or backed by external funding and is today a multi million dollar business is an interesting example of creating value out of nothing. Our global expansion model and also the employee retention schemes such as equity to key employees, flexi work timings and other employee centric schemes, were definitely key to this success,” says Suri.

Keys to success But a growing business always entails a

CO-PUBLISHED CORPORATE PROFILE

Nastrac Group on stage at APEA 2013

Nina at APEA 2013 lot of challenges. Their nature changes as the business gets older. In the startup days, Suri notes that the challenge was to gain clients without a brand name or track record. “The only way to overcome this was persistence and a lot of client calls!

Once we had an initial few clients who were open to working with us, we ensured that we serviced them in the best possible manner and their customer delight won us more business- word of mouth as we know is the best form of marketing.”

As the business grew the big challenge was to ensure they have the right team and are able to retain them. “The entrepreneurial environment of Nastrac has enabled us to retain the right kind of people. People who are committed, result oriented and dedicated to building the business. In Nastrac rewards are directly linked to performance and there is no limit to where the person can grow both in terms of role as well as financially,” reveals Suri.

Suri notes some of Nastrac’s unique differentiating factors from its competitors.

First, Nastrac is a boutique focused executive search company that ensures clients and candidates always get that special attention and constant contact to ensure optimum response and results.

Nastrac’s key management people are also professionals and practitioners from

Nastrac Group with Business Leaders the industry who have spent considerable time in the corporate world and worked at senior levels. They ensure the knowledge and skills required to offer best in class service to the clients and candidates.

She adds that the strong geographical footprint of the company helps Nastrac provide services to the same clients across all regions, thereby ensuring the same level of quality and service standards through multiple locations. Support teams across multiple time zones also help give clients 24/7 support. Lastly, Nastrac also has specialists in technology and banking sectors which prove of a very high level of industry knowledge.

After almost 16 years in the market, Nastrac is now extremely respected by its clients and the company is synonymous to quality results. Suri notes that the company

“Nastrac is a boutique focused executive search company that ensures clients and candidates always get that special attention and constant contact to ensure optimum response and results.”

has nearly 100% client retention track record, with some of their clients having worked with them since their startup days.

“This is a reassuring proof of their trust in us and our service. This I think is perhaps the biggest achievement and gives us the assurance that we are doing the right things and not only we retain our clients but also get referred by them and grow the business,” she adds.

Future plans For the next two years, Suri will focus on building scale for the company. “I want to grow the business by developing people from within to further take leadership roles within the organisation as well as inspire more entrepreneurs to join us.”

All of Nastrac’s current directors globally have grown internally with the company and hold equity in the company because they helped build the business and were entrepreneurs in their thinking and working. “My goal is to bring in more such entrepreneurs who want to build the business and become shareholders,” she adds.

“Nastrac symbolises a spirit of entrepreneurship, empowerment and belief as well as the will to make a difference to ourselves and the world around us,” concludes Suri.

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 27

singapore utilities Bowmaker said that it is important to appreciate how prices are formed.

In Singapore’s competitive wholesale electricity market, he noted that prices are determined by the cost of the highest-cost generator used in any trading period.

And, with the anticipated changes to the composition of Singapore’s generating capacity, the cost of the highest-cost generator is likely to change, which means that past prices are not a reliable guide to what the future holds, he said.

Singapore’s first LNG terminal will change energy pricing trends

Power firms to suffer as LNG terminal commences Singapore power generation firms have long enjoyed improving profits since 2007 but this is set to reverse in 2013, warn analysts.

P

ower generation companies in Singapore have witnessed a sharp improvement in profitability since 2007 due to limited new power generation capacity as there has been a shortage of gas supply in Singapore, according to Credit Suisse analyst Gerald Wong.

Sembcorp Cogen’s net profit increased from S$30m in 2007 to S$111m in 2011, while Keppel Merlimau Cogen’s net profit rose from being barely break-even in 2007 and 2008 to S$68m in 2011.

However, the commencement of Singapore’s first LNG terminal last May is predicted to change the future course of energy prices and blunt profits.

Energy capacity Based on data from the Energy Market Authority (EMA), total installed capacity in Singapore is expected to grow by 3.0 GW during 2013–14, with the bulk of the capacity 28 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

“The commencement of Singapore’s first LNG terminal is changing the future course of energy prices and blunt profits.“

growth coming through in end-2013.

To enhance Singapore’s energy security through diversifying LNG geography, and to reduce susceptibility to price and supply risk, the government began construction of Singapore’s first LNG terminal in 2010. The LNG terminal has an initial throughput of 3.5m tonnes per annum (Mtpa) and the capacity will increase to 6 Mtpa by end-2013 when additional jetties and regasification facilities are completed.

Key influencer for businesses PA Consulting Group’s energy expert Richard Bowmaker cautioned that the future course of energy prices is a key influencer for both industrial and commercial businesses contemplating expansion or new investment, and to prospective new suppliers of electricity when considering new or expanded generation facilities.

To determine the outlook for electricity prices in Singapore,

Singapore’s CCGT Traditionally, Singapore’s generation capacity has been dominated by two main types: highly efficient combined-cycle gas turbines (CCGTs), and relatively inefficient oil-fired plants. Gas prices are indexed to oil prices in Singapore, so fuel prices are relatively consistent across the different types of plants.

But the relative inefficiency of the oil-fired plants results in them being consistently higher-cost generators than the CCGTs, Bowmaker cautioned.

The amount of CCGT capacity, and its ability to generate electricity, has for many years been limited by the capacity of the pipelines carrying gas into Singapore from Malaysia and Indonesia, according to Bowmaker.

Consequently, he explained that while CCGTs have provided the bulk of the generation, the higher-cost oil-fired plants have been required to meet the demand for power, and their operation has kept electricity prices high.

This has been particularly profitable for CCGT owners who receive the high market prices for their low-cost generation. However, recent market developments look set to alter this course, warned Bowmaker.

Spurred on by the past profitability of existing CCGT plants, the new LNG terminal gas, has opened the floodgates to a wave of new CCGT construction projects.

According to Bowmaker, by 2014, almost 3 GW of new CCGT capacity is planned to be built, increasing the CCGT generation to almost 80% of total capacity. As a result, he anticipates that there will be sufficient CCGT capacity

singapore utilities to meet all of Singapore’s electricity needs in virtually all trading periods, without the need to frequently fire up expensive oil-fired generators.

The effect, Bowmaker said, will be a significant reduction in Singapore’s wholesale electric prices.

“We also anticipate a long-term trend in which pricing in the AsiaPacific LNG market (and perhaps LNG markets more widely) decouples from oil prices. If this occurs, there is potential for natural gas prices to drop below those of oil per unit of energy, which, particularly when coupled with the operation of more efficient CCGT generating plants, would further reduce energy prices in the Singapore market.”

Wholesale energy prices London Economics International (LEI) forecast that Singapore’s wholesale energy prices may fall by 16% over the next three years as the city-state’s first LNG terminal begins operation, allowing for the import of more competitively priced fuel.

LEI consultant Victor Cheung said that the average Uniform Singapore Energy Price (USEP) is expected to fall to S$159.2/MWh in 2016 from a forecast of S$189.7/MWh in 2013, as eight new generation projects, representing nearly 4 GW of capacity, come online in Singapore.

LEI’s projections show the USEP then rising gradually to S$216.4/ MWh by 2022 on power demand growth.

Cheung added that while prices for Singapore’s Piped Natural Gas, which feed the island’s existing gas-fired plants, is currently indexed to the High Sulphur Fuel Oil 180, “competitive pressures in the global LNG market would eventually lead to a decoupling of LNG and oil prices.”

“In general, the market will become more efficient and Combined Cycle Gas Turbines are expected to set prices more often.,” Cheung added.

Bowmaker said that this outlook on price is good news for Singapore’s major power consumers, but not for its generators, who will see their margins come under pressure: major power consumers should avoid long-term contracts that lock in (or worse, project forward) recent prices, and should instead consider greater exposure to the spot market which

will offer these lower prices.

New generation capacity Credit Suisse’s Wong said that there has been a strong uptake of LNG by companies to fuel new generation capacity in Singapore. In 1Q10, Senoko Energy, PowerSeraya, Tuas Power Generation, Sembcorp Cogen, Keppel Merlimau Cogen, and Island Power contracted for an initial tranche of 1.5 Mtpa of regasified LNG, which was subsequently increased to 2 Mtpa.

CreditSuisse estimates that the growth in installed capacity will lead to an increase in reserve margin to 47% in 2013E, close to the 2007 level.

“Assuming steady demand growth of 3.5% per annum, reserve margin declines to 2012 level of 37% in 2020,” said Wong.

Already, the expected increase in capacity has led to a decline in the Uniform Singapore Electricity Price (USEP) by 23% to S$174/MW in 1Q13, relative to a 13% decline in fuel costs. At the same time, vesting prices for contracts which commit generation companies to sell a specified amount of electricity were also revised downwards in January 2013, following a review of the long run marginal cost parameters.

According to Wong, one of the two key factors driving the decrease is the assumption of the capital cost, which includes the cost of purchasing the plant and all associated equipment, which has fallen from S$559.2m to S$479.5m for one unit of ‘F’ class CCGT. In addition, the risk-free rate assumption has been reduced to 2.41% from 3.31%, based on the

“The outlook on price is good news for Singapore’s major power consumers, but not for its generators.“

average daily closing yields of a AAA rated, 20-year Singapore Government Bond over the 12 month period from June 2011 to May 2012. Credit Suisse noted that while reserve margins and power spreads could revert to 2007 levels with the significant capacity increase, their base case assumptions are less negative.

“We believe a number of factors could provide downside support, including: (1) likely rational pricing behaviour of dominant gencos and new players given their high acquisition price; (2) retail contracts locked in with industrial customers which could make up 60% of electricity sales, as well as (3) contribution from non-electricity sales such as bundled utilities to customers on the Jurong Island,” said Wong.

Wong added that the downside support to market pool prices could be provided by the required return of dominant generation companies, which purchased assets from Temasek Holdings in 2008.

The sale of Tuas Power (to China Huaneng), Senoko Power (to

Significant power generation capacity expected in 2013-2014

Source: Energy Market Authority

Sembcorp’s new power bases SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 29

singapore utilities Japanese consortium Lion Power) and PowerSeraya (to YTL Power) was made at a EV/Licensed capacity valuation range of S$1.2–S$1.6m/ MW. More recently, First Pacific and Meralco purchased a 70% stake in two 400 MW plants from GMR at S$2m/MW. Sale of major gencos In 2008, Temasek Holdings divested three of its wholly owned Singapore power generation companiesPowerSeraya, Senoko Power and Tuas Power. In March 2008, China Huaneng acquired Tuas Power for a cash consideration of S$4.235bn. Tuas Power has generation assets with a licensed capacity totalling 2,670 MW, comprising 1,200 MW of oil-fired steam plants and 1,470 MW of gasfired combined cycle plants.

In September 2008, Lion Power Holdings, a consortium comprising Marubeni, GDF SUEZ, Kansai Electric Power, Kyushu Electric Power and Japan Bank for International Cooperation, acquired Senoko Power for a cash consideration of S$3.65bn.

Senoko has a combined installed capacity of 3,300 MW, comprising 1,945 MW of combined cycle plants, 1,250 MW of thermal plants, and 105 MW of fast-start gas turbines.

In December 2008, YTL Power acquired PowerSeraya for a cash consideration of S$3.6bn.

PowerSeraya has a registered capacity of 2,940 MW, comprising 732 MW of combined cycle plants, 1,990 MW of steam turbine plants and 218 MW of open cycle gas turbine plants.

The acquisition multiples for these transactions were in the range of S$1.2-S$1.6m/MW. In March 2013, GMR entered into a share purchase agreement to sell its 70% stake in GMR Energy (GMRE) to FPM Power Holdings, a 60:40 joint venture between First Pacific and MERALCO. GMRE owns a 2x 400 MW natural gas fuelled power plant on Jurong Island, Singapore. The plant is 96% complete, and is expected to commence operations in December 2013.

The sale translates to an Enterprise Value (100% basis) for GMRE of S$1,293m (S$1,612m) on project completion. The power plant was financed on a limited recourse basis 30 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

by a consortium of banks providing a $545m 17-year debt facility and a further $270m credit facility. The remaining 30% stake in GMRE is held by Petronas that will continue to stay invested in the project.

According to Wong, the acquisition multiple of S$2m per MW is at a premium to the valuation of assets divested by Temasek in 2008.

“We believe this could be due to higher efficiency of a newly completed plant, as well as umprovement in power spreads since 2008. We believe that there might be downside support to market pool prices based on the required return of generation companies. For example, we estimate that a long-term EBITDA of $100m is required to generate an 11% IRR for the investments by First Pacific and Meralco, which is almost in line with the effective EBITDA for a 70% stake in Sembcorp Cogen (800 MW) in 2011.”

A fixed cost base Based on CreditSuisse estimates, the dominant generation companies have a higher fixed cost base relative to Keppel and Sembcorp. Depreciation cost per MWh of electricity sold in 2011 was around S$9.3–11.9 for the dominant gencos, versus S$6.1 for Sembcorp and S$5.1 for Keppel.

Similarly, finance cost per MWh of electricity sold in 2011 was around S$4.3–12.5/MWh in 2011, versus S$2.4/MWh for Sembcorp and 2.6/ MWh for Keppel. Wong nonetheless

The downside support to market pool prices could be provided by the required return of dominant generation companies.4”

noted that profit decline could be moderated by contracts locked in with retail customers. While public data is available on spot prices and vesting prices, there is limited disclosure on the retail contracts of generation companies.

Before 2001, all consumers in Singapore were subjected to the Singapore Power Electricity Tariff.

Following the liberalisation of Singapore’s electricity retail market in 2001, a contestable customer with minimum electricity consumption of 10,000 kWh and above has the option of choosing the retailer that provides the best service.

According to Wong, such contracts, which typically range from a month to a year, limit the impact of volatility from spot prices. “We estimate that such retail customers made up about 30–40% of electricity sales for Tuas Power and Sembcorp Cogen in FY11,” he said.

Contributors of Singapore power generation assets to net profit

Source: Company data, Credit Suisse estimates. FY12 for YTL Power and Huaneng, FY11 for Sembcorp INdustries and Keppel

St. James Power Station, Singapore’s first coal-fired power plant

OPINION

MANEESH SAH

Why should Singapore Airlines stick with the Singapore Girl?

BY MANEESH SAH Regional Marketing Director Towers Watson

S

ingapore Airlines launched its new advertising campaign recently. Given SIA’s stature as one of the top homegrown brands, it attracted lot of comments in the local media.

Branding experts and frequent travellers had a field day discussing the merits and the demerits of the new campaign. Some felt that SIA should be moving away from its traditional focus on the Singapore Girl.

To be clear, Singapore Airlines branding strategy which revolves around its service crew has served it well over the years. However, the best brands never start out with the intent of building a great brand. Instead, they first focus on building and delivering a profitable product or service and an organisation that can sustain it.

Towards this end, SIA has invested in the latest aircrafts, technology and processes. But very early on, SIA realised that it needed quality people to differentiate its offering. So it has invested in attracting and engaging the right cabin crew.

Savvy employers have learned that securing talent requires a compelling and differentiated employer brand that goes well beyond core salary and incentives. This includes learning and development opportunities. Here is where SIA scores. Even though learning and development are key areas in service industries, SIA remains

“To be effective, a company’s employer brand needs to be in alignment with its customer facing brand.” the airline with the strongest focus on this aspect. Its development programmes for newly recruited cabin crew are reported to be the most comprehensive in the industry.

SIA trains its fresh recruits for four months— twice as long as the industry average of eight weeks. Since SIA recognises that it’s in the business of selling experiences, its programmes cover not only safety and functional issues but also include courses on deportment, etiquette, wine appreciation and cultural sensitivity.

These programmes enable cabin crew to provide gracious service reflecting warmth and friendliness while maintaining an image of authority and confidence. (Sources: “Singapore Airlines’ Balancing Act”, Harvard Business Review. Loizos Heracleous and Jochen Wirtz,

July 2010; Flying High in a Competitive Industry: Cost-Effective Service Excellence at Singapore Airlines, McGraw-Hill Education. Jochen Wirtz, Loizos Heracleous, and Nitin Pangarkar.)

Prospective cabin crew know that a career with SIA will equip them with these critical skills---skills which will keep them in good stead for many years in an increasingly globalised world. There are many examples of cabin crew pursuing successful careers in customer relations, marketing, PR, etc. even after they complete their contracts with SIA. To be effective, a company’s employer brand needs to be in alignment with its customer facing brand. The Singapore Girl does a great job of bringing this alignment in the minds of its prospective employees. Earlier in April this year, SIA was named Singapore’s best employer brand for the second consecutive year by an independent agency.

As the war for talent increases in an uncertain economic environment in Asia, SIA will do well to continue to stick with the Singapore Girl as a key component of its brand strategy, despite what its detractors might suggest. The gracious Singapore Girl may well be helping SIA to win not only customers but attract high quality talent as well.

The girl still has SIA’s heart

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 31

COVER STORY

The Singapore property market is undergoing a slump

A tale of two cities as price gaps hit record highs

With the price gap between prime properties and nonprime at record levels, something must give, but what?

I

nvesting in Singapore’s lucrative property markets is no longer for the fickle-minded and faint of heart, according to analysts.

To fully reap the opportunities brought on by Singapore’s new wave of completions from private residential properties to strata commercial properties to factories in the next couple of years, investors must be capable of holding their investments for the longer term even amid expected volatility.

R’ST Research Ong Kah Seng notes that property investments here will be suitable for a specific investor profile: Those with a genuine need to invest, or own and owner occupy in the case of residential property, and are quite risk averse but possess strong holding power.

Ong explains that having strong holding power means the investor can weather through any interim

“Singapore properties are still an excellent asset class of investment and hedge against inflationary pressures.”

slight price corrections or property vacant period which may trigger as Singapore’s new supply ramps up.

Risk-averse, long-term property investors who prefer stable, longterm returns should still flock to Singapore, compared to risk-taking specu-vestors who are often quicker to time the market and dispose their properties for a profit.

Growth opportunities The Singapore property market is undergoing a slump, but most analysts believe this will only be temporary.

Singapore property has undergone seven rounds of cooling measures, resulting in activities and transaction volumes moderating across the sectors, but growing demand will re-accelerate the market, says, RE/MAX Singapore executive director Thomas Tan. In the long

run, with the population growth generating demand for housing, Singapore properties, he believes, are still an excellent asset class of investment and hedge against inflationary pressures.

Nicholas Mak, executive director of SLP International echoes the same while adding that due to Singapore’s stable economic and political climate, the medium- to long-term outlook for the Singapore property market is positive, even with the several rounds of cooling measures implemented by the government. The government, he adds, has also planned for new major infrastructure and the development of a few new towns which will enhance the attractiveness of Singapore as a place to work and live.

On 28 June this year, the Monetary Authority of Singapore (MAS) introduced the Total Debt Servicing Ratio (TDSR) framework which applies to all property sectors. Housing loan applicants are not allowed to use more than 60% of their gross income to pay for the monthly instalments for their mortgages and other outstanding debts such as car loans and personal loans. In addi-

COVER STORY tion, buyers may also have to pay Additional Seller’s Stamp Duty for purchasing residential properties for investment. The TDSR combined with the other existing property market cooling measures has dampened buying activities, said Mak, but not totally dissuaded investors from the market.

“People will still continue to purchase properties as some Singaporeans regarded property as a stable form of investment,” said Mak, further noting that prices across most of the property sectors such as the residential, commercial and industrial sectors have actually increased over the past three years. The price growth has outperformed the rental increases and thus the rental yield in these sectors has been squeezed.

Singapore’s advantage John Stinson, executive managing director for Asia Pacific capital markets at Cushman & Wakefield (C&W) Singapore, highlights that Singapore holds a distinct advantage in that it is held in high regard as one of the most transparent property markets in the world. Stringent regulation, he says, means that investors here are well protected, and have access to highly capitalised, robust banking systems as well as sophisticated leverage facilities.

Stinson further reckons that land in Singapore will always be a scarce commodity due to it’s geographical constraints, which in turn offers a natural driver for continuing capital growth. “As the market is a highly liquid market, investors are able to to take advantage of the changes in market direction in an efficient time frame.”

Christine Li, head of Research and Consultancy at OrangeTee also believes that it is a relatively safe option for investors to park their monies in Singapore. Singapore private residential properties, she said, currently enjoy low vacancy rates of around 5.5% and rentals yield between 2.5% and more than 5% depending on the location. Mortgage rates, she adds, are still low and are not expected to rise too quickly in the near future.

“Rental yields are generally higher than mortgage interest rates, so investors can build a positive passive income stream if they plan well.”

In terms of investment poten-

tial, R’ST Research‘s Ong is most bullish on the various new lifestyle hubs being created, like Harbourfront, Marina Bay, as well as new regional hubs like Jurong East and Woodlands. Singapore’s attractiveness to investors will also pick up as comprehensively planned housing estates and enclaves rise to improve the overall vibrancy and attractiveness of the city for both residents and visitors. This will underpin the leasing demand amid increased new completions, said Ong, and thus strengthen the investment fundamentals of most properties in Singapore.

Challenges Investment opportunities in Singapore property market remain robust, according to analysts, but these come with increasing risks and challenges.

Virata Gamany, managing director at Vision International Properties notes that Singapore property used to demonstrate strong growth and provided good capital appreciation to investors. However, the tide, he says, is changing and the days of astounding price appreciation may have passed.

“Rental returns are barely 4%, and not as high as before, and certainly not as high as some other places. For example, several cities in Canada average 7%.”

Gamany also adds that Singaporeans who already own their own homes are no longer as keen to buy

“The tide is changing and the days of astounding price appreciation may have passed.”

property for investment purposes.

The tightening of financing such as the latest TDSR and imposition of additional stamp duties, he said, are forcing potential purchasers to hold back while property speculators are being pushed out of the market and moving to alternative investments or investing in property overseas.

Best investment strategy So what could be the best investment strategy to thrive in this difficult market?

According to R’ST Research’s Ong, only the investor with the right mindset will find opportunity to own a property for long-term capital gain in Singapore.

The series of cooling measures, he said, have meant that there is almost zero opportunity for specu-vesting.

This means the industrial property investor cannot accede to a too-high purchase price, where returns can

Total room inventory to increase by c9% in 2013

Sources: STB, CDREIT, DBS Vickers

Singapore has one of the ‘most transparent’ property markets

COVER STORY only be met with very high rentals for industrialists.

For residential property investors, Ong believes that they should have the ability or intention to be an ‘investor-occupier’, that is to have the ability to endure months of rental income losses when the property is vacant because they themselves can enjoy the property.

Industrial property investors, on the other hand, must make sure they are buying to rent to bona fide tenants, i.e. industrialists, and not set rents too high as industrialists generally have affordability concerns.

“I think long-term property investment prospects in Singapore are positive, except returns are gradual and investors must come in with right intention – to have ability to hold the property long term, instead of hoping for quick gains upon resale. Also, following the implementation of the TDSR, the overall property market sentiments might cool more definitely than in the past but property investing in Singapore in long run is expected to be very promising notwithstanding seasonal economic peaks and troughs,” he

“Investing in residential property these days would require more careful thinking and caution.”

Estimated pre-commitment of office and business parks space

Sources: URA, CBRE, A-REIT, DBS Vickers

Transaction volume of investment sales by property, Q2/2013

Sources: Savills research & consultancy

said.

Analysts reckon that investing in residential property these days requires more careful thinking and caution. Vision International’s Gamany cautions that the local market is simmering down and likely to continue this way for some time, making selling local property more difficult. It’s not surprising then, he said, that local property developers and real estate agents are not exactly warm to these cooling measures by the government.

While the measures are beneficial for all in the long run, Gamany said that the market needs time to level off and normalize. “If it’s allowed to continue escalating at the rate it has over the past few years, the market will eventually correct drastically and crash. That would cripple not just the housing industry, but the economy as a whole, just as the US economy was forced into a recession after the property market corrected, in some areas as high as 40% - 60%.”

Investing in the residential sector RE/MAX Singapore’s Tan advised that if the investors for residential properties are not taking a 10-year investment decision, they will do well to avoid this sector as the TDSR and cooling measures should see its full impact in the next year or so.

R’ST Research’s Ong notes that the introduction of the TDSR marked the beginning of a new chapter in residential market, where overbuying and over-investing in private residential properties are disallowed.

“The TDSR is very meaningful because it discourages the man-inthe-street to over stretch his affordability by taking multiple property loans, and heavily rely on rental income to pay for the monthly mortgages. The ordinary man with average affordability will encounter financing challenges if the unit runs vacant in certain periods, given leasing competition will intensify in future ramp up of new project completions.”

Ong cautions that a major challenge for the investor of private residential property is there will be stepped up new supply of project completions, which will diminish leasing opportunities. Then there are also many who bought into private

homes in new growth locations with untested rental demand suburban locations, thinking there will be ample investment opportunities to rent the unit out when project completes, he adds. “The TDSR puts a stop to over-investments, including buyers who hold self-purported investment potential for their dream property.”

Credit Suisse analyst Shirley Wong also notes that supply pressure could weigh on prices in 2014.

“Private residential prices have been resilient so far, and we expect property prices to hold firm in 2013, while supply pressure could weigh on prices in 2014,” she said.

According to Wong, an average of 22,150 units per annum largely in the OCR are expected to be completed from 2014–16, versus the historical average private demand of 7,780 units per annum, although the latter is likely understated as demand was constrained by the supply crunch from 2001–08. “That said, we believe any price declines would be contained, supported by strong holding power, low system vacancy rates (6.3%) and responsive measures, as it is not the government’s intention to crash prices,” she added.

Rental yields In terms of rental yields, Ong said that private residential properties have very low yields of about 2.53.5%, but there is higher flexibility to owner-occupy the unit should it not be easily leased out.

Increased new completion in years ahead, he said, will mean there is risk of running the unit vacant at times since competition for tenants will increase.

Orange Tee’s Li shares the same view while adding that even for cash rich buyers, they might have to put down more cash in order to buy properties. This, she added, has reduced the attractiveness of the asset class as a whole.

According to Li, due to the continuous release of housing measures by the Singapore government, which in summary lowers the amount of leverage that investors can use, investors have been veered into small units with lower quantum. Prices in the Outside Central Region (OCR), which represents mass market

COVER STORY and smaller units have been rising rapidly in recent quarters, outpacing bigger units and those in the central regions. However, Li believes that resale homes might benefit from the current trend, as upgraders might need to sell existing homes before they can apply for bigger loans.

Li also notes that demand from foreigners was reduced after the implementation of ABSD, and as a result, activities in the Core Central Region (CCR) have been rather muted over the last two years. According to Li, currently, the price gap between a CCR home and an OCR home is the lowest in history.

“We are talking about $1,200 psf on average for OCR homes and $2,000 psf for CCR homes. The price gap doesn’t make sense. Given the growth prospect of Singapore as a gateway city to Asia, the prices in the CCR should have more upside relative to OCR.” C&W’s Stinson said that from the middle of 2013, it has been interesting to note the visible decline in residential property launches taking place as developers take a view on the latest round of cooling measures put in place - and in particular the new commitment tests. On the demand side, Stinson said this means that firm commitment at launches will become more elusive as borrowers take more time to obtain and evaluate loan applications.

Robust new launch sales There are notable exceptions though. Barclays Research have visited two of the most recent popular new launches: Sky Vue by CapitaLand/Mitsubishi Estate and Thomson Three by UOL/SingLand on the first week of October. Both projects have moved to 70-80% sold in three weeks.

Tricia Song, analyst at Barclays Research said that in October, they expect developer sales volume to drop sequentially, given the lack of attractive launches, the tighter TDSR measures continuing to bite and some of the investor liquidity being soaked up.

“Mortgage bankers we spoke with admitted to fewer mortgage applications and approvals since the June TDSR rules although loan packages offered are relatively stable at SIBOR

Sky Vue by CapitaLand

plus 0.85-0.95ppts for up to the first four years.”

While Singapore’s residential sector faces stagnant price growths, the country’s commercial and industrial real estate segments are still dotted with opportunities, notes SLP’s Mak. Commercial and industrial sectors Currently, the Additional Buyer’s Stamp Duty and Seller’s Stamp Duty is not imposed on commercial property purchases. Hence, Mak said that investors do not need to pay any additional taxes for their second or subsequent commercial properties.

Also, they do not need to pay any Seller’s Stamp Duty for industrial properties if they do not sell their industrial properties within the first three years.

R’ST Research’s Ong meanwhile cautioned that while the yields of industrial properties are still the highest, at about 6-7%, this comes with higher risks. Industrial properties, he said, have very precise technical specifications, which means properties can only cater to the operational

“While the yields of industrial properties are still the highest, at about 6-7%, this comes with higher risks.”

needs of some industrialists and limits the pool of eligible tenants for the industrial landlords. And in addition to that, Ong said that new completions are expected to flood in the coming years. The same holds true for strata commercial properties that can only be rented to certain commercial tenants or retailers, so the high yields of about 5% cannot be seen as promising a high return, he said.

Orange Tee’s Li also warns that the industrial market is susceptible to supply risks. “If the economic fundamentals stay intact or show further improvement following the recovery in the US and Europe, the supply could still be absorbed by the market. However, if there are external factors over the next four to five years, we could see more price pressures due to the large supply.”

Li sees better prospects in the retail sector, which has been attracting a lot of retail investors and institutions lately. Li cited for example, commercial developments such as Alexandra Central and Pavilion

COVER STORY Square which were almost sold out within a day. Wen Way investments, a Singapore-incorporated company controlled by mainland China interests, bought all 22 retail units at The Sail@Marina Bay for $105 million.

CLSA analyst Yew Kiang Wong notes that retail rents for prime and suburban areas both remained flat, maintaining the prime-suburban rental gap at $2.45 psf per month, the widest seen since 3Q11.

According to R’ST Research’s Ong, there are two sectors that haven’t seen significant cooling measures -a strata offices and strata shops. But he warns that investors shouldn’t just rush into buying either, especially new strata malls, which are expected to suffer issues on tenant mix, compatibility and vibrancy upon their physical completion. The primary issue is that there is no central mall owner to ensure that the strata malls achieve the right tenant mix and mall vibrancy.

“The MCST (maintenance committee) has more control at most in terms of maintenance, not quite in terms of each retailer’s offerings.

These will impact the long-term returns of strata shops.”

Office sector Some analysts, meanwhile, are eyeing the potential of the office sector, which has been showing steady growth.

C&W’s Stinson notes that prices

for well-located office suites continue to show robust demand from both investors and occupiers. He believes that predicted rent growth in the office sector will generate investor opportunities as asset price appreciation comes to fruition later this year.

“After 18 months of stagnant rental growth, absorption has risen to meet tenant demand and we are now starting to see positive rental forecasts for the future.”

CLSA’s Wong reckons that office spot rents flatlined in 2Q13 with both prime grade A rents and decentralized office rents both remaining unchanged at $9.55 psf and $7.10 psf, respectively.

Credit Suisse’s Wong said that for the office sector, 2Q13’s net positive private office demand of 118,400 sq. ft. was encouraging, given the weak economic conditions. This has helped to support rents, she said.

“For the first time after five consecutive quarters of decline, URA’s island-wide office rental index registered a 0.2% QoQ increase.

Median prime rents (Downtown core and Orchard) were flat at SGD 9.35 per sq. ft., while median rents for the other areas rose marginally to SGD 5.60 per sq. ft. (+0.4% QoQ). This supports our view of a recovery in office rents, although we continue to believe that the recovery is likely to be mild, given lackluster demand (particularly financial

“After 18 months of stagnant rental growth, absorption has risen to meet tenant demand and we are now starting to see positive rental forecasts for the future.”

sector) and supply expected,” she added.

Investors might also want to look into the hotel and logistics markets, according to C&W’s Stinson. He notes that visitor numbers continue to show an upward trend, revealing a still-strong conference market and an increasing interest in Singapore’s newest visitor attractions.

These factors should continue to drive growth as the hotel market is still little undersupplied at the premium 4- and 5-star end of the market.

Stinson also remained bullish on logistics market investments given Singapore’s rising status as a regional hub. “Globally there is a trend to locate inventory closer to major population centres which will benefit Singapore as a major shipping port.”

According to Vision Properties’ Gamany, Hong Kong shares similar issues with Singapore, in that property prices have been escalating drastically, prompting the government to impose stringent measures to control the market and rein in prices.

Office spot rents bottomed

Residential supply pipeline

Sources: CLSA, CBRE,

Industrial spot rents (factory and warehouse rents at record high)

Sources: URA, HDB, Credit Suisse

Sources: CLSA, CBRE,

OPINION

KARIN CLARKE

Is Singapore really heading towards flexible work arrangement now?

BY KARIN CLARKE

F

lexible work arrangements (FWA) are often described as the next frontier of smart talent management. However in Singapore, just two out of 10 employees have the flexibility to work at alternative locations, and just 25 per cent say they can work to timings that suit their family needs.

This comes despite the Singapore government making a concentrated effort to promote FWA in recent years. In addition to FWA funding such as the Work-Life Grant, the Ministry of Manpower is also working with employer groups to help businesses evolve. Finding flexible workplace solutions will assist productivity, workforce participation, retention of mature workers and will help curb the use of foreign workers.

Many companies and employers in Singapore are still unsure of the options available, benefits and feasibility of implementing FWA in our workplace models. On the flip side, employees lack understanding of FWA practices and doubt that it is a viable form of employment in Singapore. The first step to realising FWA in Singapore is for both employers and employees to understand the benefits of such arrangements – here are a few solutions: For employees • Say goodbye to rush hour Traveling to and from the office during rush hour is time-consuming and distressing everywhere in the world. With flexible working locations, employees save precious time and are able to put those hours stuck on the train to better use.

• Juggling personal and professional commitments With a flexible work schedule, employees have the ability to better plan and attend to work and family commitments. They can now take care of children or elderly parents at home while juggling work requirements. Such flexibility could lead to significant savings, such as the need to hire caretakers, and grant peace of mind.

• Less Facebook, More Productivity Employees concentrate better at work and are more productive with FWA. Not only can they have peace of mind knowing their personal responsibilities are taken care of, they understand that there might be less time to complete their tasks and consequently focus better to finish their work, spending less time being unproductive cooped up in an office.

For Employers • Increase the Bottom Line An immediate benefit of FWA is reduced overhead costs. A smaller office space and fewer facilities are required when employees work from home or on the road.

A-Star Team • Improved productivity is likely one of the most attractive outcomes of FWA. Not only can employees focus better, the business will see increased productivity through longer opening hours of the office, reduction in absenteeism and lateness, and a better ability to cover absenteeism when it does happen.

Talent Magnet • Finding the right talent to grow your organisation is key to a successful business. With FWA, organizations create more opportunities to attract talent from a larger pool of candidates, and are able to better retain key and valued staff who might require flexibility to cope with demands and changes in their lives. Adoptions rates are low, but the truth is that many companies have seen great benefits in FWA and manage to keep their employees connected, engaged and productive.

FWA might seem like a tedious process to be involved in, but the benefits certainly outweigh the efforts. The best thing is that flexibility helps to retain and grow human capital - an organisation’s biggest asset.

Get your flexy on!

Singapore’s top 15 Architecture firms

DP Architects’ Twin Peaks project

DP Architects leads the pack of largest architecture firms Firms with proven and tested track records for over 40 years dominate.

D

P Architects (DPA) has topped Singapore Business Review’s inaugural list of largest architecture firms in Singapore for 2013 based on the number of employed architects. The data was primarily obtained from the Board of Architects and company surveys .

DPA, with 76 registered local architects, was founded in 1967. Its first two major accomplishments were mixed used buildings People’s Park Complex and Golden Mile Complex. DP Architects extended its global reach and setup branch offices beyond Singapore and the Southeast Asian region to locations including China, India and the Middle East.

A spokesperson from DPA revealed that the firm will be opening a new office in Myanmar in 2014.

Other prominent projects of DPA include Marina Centre, the Esplanade – Theatres on the Bay, Resorts World Sentosa, and Singapore Sports Hub. It has also worked in conjunction with the Urban Redevelopment

DPA will be opening a new office in Myanmar in 2014

38 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Authority to transform Orchard Road into one of the world’s foremost retail and fashion shopping streets.

According to DPA’s spokesperson, the firm has reinvented some 20 buildings along Orchard Road in the last three decades. This year, amongst its major projects include River Safari, Four Acres Singapore, Zhongshan Park, Twin Peaks.

There are many significant local projects underway, many of which are slated to complete from next year onwards.

Aedas came in second with 58 architects. Aedas has been participating in designing Singapore’s built environment for years. According to Kevin Jose, Aedas’ member of the Board, some of the most important projects they have undertaken here include The Star and 29 MRT stations. Other prominent projects include Star in One-North and Changi City and the soon-to-be completed project – CX2-1.

The third largest architecture firm

is CPG Consultants with 49 local architects. The Academia which was completed this year is a project of CPG. According to a CPG’s spokesperson, amongst projects slated for completion in the next two years include NTU Learning Hub, Ng Teng Fong General Hospital & Jurong Community Hospital and National Art Gallery.

Fourth placer is the over 50year old Surbana International Consultants with 43 local architects. Among its notable local projects include the revamp of Bugis+,CleanTech One, Singapore University of Technology and Design’s student housing and sport facilities and Aquatic Science Centre. Its featured residential projects meanwhile include Heron Bay, Skies Miltonia, The Nautical, CityLife at Tampines, Sky Residences and Century City Residences.

Another 40-year old firm ONG&ONG came in fifth with 31 architects. Among its recent projects include Audi Centre Singapore, CT Hub, H-House, Adria and Hundred Trees. In addition to projects in Singapore, ONG&ONG has also completed large-scale developments regionally.

Rounding up the list are RSP Architects Planners & Engineers, ADDP Architects, P&T Consultants and Architects 61. Three firms tied in 10th place - Jurong Consultants, SAA Architects and WOHA Architects.

Jurong Architects which employs 11 architects is behind the following projects: Medical Technology Hub Building (MEDTECH) and Cleantech 2. Jurong has expanded beyond Singapore and their professional expertise has reached 150 cities across 47 countries. Among its major projects overseas this year include the Tianjin Eco City Landmark Building and Low Carbon Living Lab. At the bottom of the list are Design Link Architects, DCA Architects and JGP Architects.

Design Link Architects is responsible for recent residential project Hillion at Petir Road and an office development at Venture Road. Its project The Six Avenue Residences and Martin Place Residences received Greenmark Gold.

Singapore’s top 15 Architecture firms Architecture firms

Total number Architecture of Architects professionals

Technical Staff

Total Number of Staff (SG)

CEO/ ChaIrman/ MD

1

DP Architects

76

595

177

882

Mr Francis Lee

2

Aedas

58

114

103

255

Kevin Jose

49

161

132

781

Khew Sin Khoon

3

CPG CONSULTANTS

4

SURBANA INTERNATIONAL

43

142

140

1669

Pang Yee Ean

5

ONG&ONG

31

31

419

527

Ong Tze Boon

6

RSP Architects Planners & ENGINEERS

29

166

55

464

Albert Hong

7

ADDP Architects

25

84

26

164

N/A

8

P&T Consultants

19

>19

>19

~250

Sern Vithespongse

9

Architects 61

16

80

30

154

Michael NGU King Teng

10

Jurong Consultants

11

61

13

305

Er. Tang Tat Kwong

11

SAA Architects

11

35

80

~120

Yeo Siew Hai

12

WOHA Architects

11

>11

>11

~90

Richard Hassell & Wong Mun Summ

13

Design Link Architects

8

14

11

31

Cheng Jian Fenn

14

DCA Architects

7

10

21

~35

Koo Tin Chew, Vincent

15

JGP Architecture (S)

7

>7

>7

~80

James Goh Ah Whatt

Source: Board of Architects, companies, estimates

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legal briefing

The taxman cometh

Watch out: Your Singapore info may now be shared with foreign tax departments.

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our personal data may not be for local use only. Year 2014 may welcome a new rule that will empower the Comptroller of Income Tax to extract confidential information and documents from Singapore-based individuals to be provided to foreign tax authorities.

Experts said that the proposed changes will go beyond bank and trust information held by bodies supervised by the Monetary Authority of Singapore (MAS).

The proposed amendments to the income tax are said to be in line with the government’s effort to change substantially the exchange of information (EOI) regime introduced in 2010 and strengthen its framework for international tax cooperation to combat cross-border tax offences.

What are they key changes under the proposed amendments?

Bird & Bird consultant Sundareswara Sharma noted that the first of the three key changes is the extension of the ability of the Comptroller to provide the information and documents to FTAs who do not have the latest rights to the information or documents under their bilateral tax agreements (DTAs) with Singapore or whose countries have no DTA at all with Singapore.

Drew & Napier partner Eric Chan adds that the

“The IRAS’ information-gathering powers will be expanded to meet Singapore obligations under the Singapore-US Model 1 FATCA IG.” Ministry of Finance will extend EOI assistance (in accordance to all of Singapore’s existing tax agreement partners without having to individually update each bilateral tax agreement. This will be done by lifting the domestic interest requirement for EOI assistance and statutory confidentiality provisions under the Banking Act and the Trust Companies Act, instead of revising the individual tax agreements.

However, Chan notes that EOI assistance will continue to be subject to reciprocity, and the regime will be administered by IRAS and other competent authorities of the relevant tax agreements.

Secondly, the statutory protection in the Income Tax Act that requires the Comptroller to justify his request before the High Court and to obtain a court order before he can obtain secret information and documents from a bank or trust company will be removed. Sharma said that in such legal proceedings, 40 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Sundareswara

Eric Chan,

Sunit Chhabra

the Comptroller initiates a court action to implement the request for information from the relevant FTA. Finally, Sharma said that an agreement between Singapore and the United States (with whom there is no comprehensive DTA) to require Singapore financial institutions to comply with demands of US tax compliance legislation, namely the Foreign Account Tax Compliance Act (FATCA), will be concluded and implemented.

Allen & Gledhill partner Sunit Chhabra said that the IRAS’ information-gathering powers will be expanded to meet Singapore obligations under the Singapore-US Model 1 FATCA IGA, which is expected to be signed before 1 January 2014.

These powers include the routine collection and transmission of relevant information covered by the IGA, as well as relevant enforcement powers to sanction non-compliance.

How are taxpayers affected by the new rule?

Sharma said that the consultation paper which resulted from a public consultation held in July states that the basic safeguards to taxpayers will not be undermined. However, he cautioned that taking away the scrutiny of the High Court, one of the two levels of checks under the Income Tax Act upon a request for information from a FTA, may not necessarily assure taxpayers that their rights will continue to be safeguarded. “IRAS itself is the other check, besides the High Court. This suggests that after removing the requirement for the Comptroller/IRAS to get a High Court order, IRAS would be the only check, unless the taxpayer’s right of appeal to an independent third party does continue to exist meaningfully.” said Sharma.

In describing the removal of the statutory protection of a High Court order, the summary table in the consultation exercise states this streamlines IRAS’ EOI administration. Sharma noted that t is not clear where or how taxpayers will continue to have the right of appeal, nor to whom.

Anyhow, Sharma said that the proposed changes do not prevent any action taken by the Comptroller from being challenged in, or reviewed by, a court of law, where necessary. “The Comptroller, as a public officer, is still required to exercise his powers within the law in carrying out his public duties,” he said.

What would be the implication of the new rules?

Chan said that the proposed amendments to the Act are just a first step, and it is expected that more details on the reformed EOI regime will be contained in additional subsidiary legislation to be made by IRAS once the proposed amendments are finalised into a Bill and adopted by Parliament.

Co-published corporate profile

Jurong Consultants: Leading the Way through Innovation

The architecture firm’s new projects are a testament to its innovative design approach

S

ingapore’s architecture business is booming, driven by the almost 5% per year growth in the construction industry up to 2015.

To get a better understanding of the architecture scene and the trends emerging in this flourishing sector, Singapore Business Review has recently caught up with one of the leaders in the industry - Jurong Consultants.

The firm is ranked 10th in the inaugural listing of largest architecture firms in the city based on the number of employed architects.

About Jurong Consultants Jurong Consultants is one of the largest multi-disciplinary consulting services providers in Singapore, offering integrated services such as architecture, master planning, engineering, quantity surveying and project management. Besides Singapore, Jurong Consultants also has operations in China, India, and the Middle East.

A member of the Jurong International Group which was formed in April 2001, Jurong Consultants is a product of the merger between the technical arm and the international business arm of JTC Corporation, a statutory board under the Ministry of Trade and Industry.

With a large team of creative professional architects and urban designers, Jurong Consultants prides itself as being the pioneer in offering innovative and functional designs that go beyond conventional architecture.

“Adopting a philosophy of designing from the inside-out, our architects are committed to delivering economically relevant, innovative, eco-friendly, and culturally sensitive solutions,” according to Jurong Consultants’ Senior Vice President (Architecture) Daisy Hia. Due to the rising competition in Singapore, Ms Hia admitted that recruiting the right talents is becoming tougher than ever, but Jurong Consultants continues to attract the top talents with its strong

“Jurong Consultants is constantly striving to incorporate innovation into its design, and going beyond conventional architecture.”

emphasis on innovative design, robust training and continual development programs for all staff. Ms Hia said staff training for both new recruits and veterans is a crucial investment to ensure that Jurong Consultants pegs its designs at world-class standards.

Market Competition Ms. Hia said one of the perennial challenges facing Jurong Consultants is that the Singapore market is small and competitive.

In addition, customers are looking for more value-added services beyond design, she said.

In order to grow effectively, Jurong Consultants expanded its business overseas and diversified its portfolio while still focusing on core competencies.

Jurong Consultants is constantly striving to incorporate innovation into its design, and going beyond conventional architecture in order to meet customers’ needs. The firm sets itself apart by focusing on new architectural building typologies, emphasising on Green technology, and devoting resources towards research and development to stay ahead of competition.

“Our design has a high sustainability focus and we strive to become a Green Champion,” said Ms. Hia. In terms of capabilities, Jurong Consultants has expanded its expertise beyond industrial parks and projects to new areas such as underground infrastructure, low carbon buildings, laboratories and Green technology buildings.

Jurong Consultants’ major local projects include Medical Technology Hub Building (MEDTECH) and Clean Technology Building (Cleantech 2). These are new typology projects with high emphasis on sustainability.

Overseas, Jurong Consultants is also extending its reach by offering innovative solutions, and this is evident from the first Low Carbon Living Lab in Tianjin Eco City.

The Low Carbon Living Lab is the first low carbon building to achieve the Building and Construction Authority (BCA)’s Green Mark Platinum and the Green Building Evaluation Standard (GBES)’s Platinum (Tianjin Standard).

Jurong International Group now has projects in 150 cities across 47 countries.

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 41

CMO Briefing are looking at our emails - via mobile gadgets or their desktops - and tailor our strategies accordingly.

Based on our customers’ interaction with our emails – their open and click behaviour, we can decide which mobile app push notifications to send them.”

How Zalora makes e-marketing work

Find out how custom-tailored email marketing could work for Singapore brands.

C

ompanies are using every method possible for brand marketing and the massive penetration of smartphones in Asia has just given them one more channel to get their message across. One of the most common direct marketing strategies is done via email. Direct marketing via email proves to be a good individualized channel and a positive method of engaging a customer, at least according to e-commerce companies ZALORA and Wego.

How not to be spammed Candice Ong, regional marketing director at ZALORA South-East Asia, notes that email marketing is an individualized channel allowing companies to speak directly to the consumer to deliver a message that is highly relevant, targeted and tailored for the reader by organizing data such as their surf, click, and purchase habits. “By collating information about a consumer’s experience with ZALORA, our communication with the customer is more personalized, relevant, and therefore more likely to interest them and encourage action,” she says.

Joachim Holte, chief marketing officer at Wego, adds that it’s important to ensure that the marketing material is not deemed as spam so being conscious of frequency and content is vital. Tailoring to specific markets provides an opportunity to tailor content to suit local tastes and trends that are more relevant to the customer. “It also allows us a more personal interaction outside of some other marketing channels and overall should sit within the greater objectives of a company’s marketing strategy,” says Holte.

ZALORA maximizes the opportunities offered by smartphones by ensuring that email messages are mobile-optimized. “We also monitor how customers 42 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

The point is to ensure that the communication is as personalised as possible, and by doing so ensure that our user experience is positive and informative.

Exploiting email marketing ZALORA uses automated EDMs to remind customers of their intention to shop. When a customer adds an item to her wishlist but doesn’t take action on it after some time, ZALORA’s system will send her a reminder to purchase the item before it’s sold out. When a customer abandons her cart or leaves items in her online shopping cart without coming back to purchase them, an automated email will also be sent to her as a reminder that she has items waiting for her in her cart.

“As this email marketing tactic is a lot more relevant and targets customers who are further down the e-commerce conversion funnel, the conversion rates for these automated EDM’s are twice of the normal edms,” says Ong. On the other hand, Wego’s Holte reckons email marketing should not only be about branding, but it should also provide a tangible benefit to the recipient. Wego uses the weekly Travel Deals newsletter to share the best and latest travel deals and offers provided by their travel partners.“By tailoring our newsletter to local market travel preferences using Wego’s unique popularity by location technology, we are able to deliver travel options that suit that particular market. We additionally include hand-picked experiences from our Travel Editor to further personalise and inspire our customers,” adds Holte.

“The point is to ensure that the communication is as personalised as possible, and by doing so ensure that our user experience is positive and informative.

Our marketing messaging through our newsletter is an additional value for our users, while also importantly providing additional travel inspiration.”

Investing on infrastructure Ong revealed that email marketing is not considered as part of marketing budgets unlike other channels such as offine/paid marketing as the cost per thousand dispatched email is low. Instead, they invest more in the infrastructure of the channel.

“We invest in strengthening the sophistication of our email distribution platform. This platform would enable us to easily use data we have collected on the customer for targeted communications (for the right messages to reach the right customer), while enabling us to further collect and analyze information on our customers based on their interactions with our newsletters,” says Ong. Just like any other marketing strategy, email marketing may only work for a certain group of consumers and companies. But email marketing proves to be an effective medium especially for companies like Wego and ZALORA that do not get to physically interact with customers.

OPINION

PETER YU

PR lessons Singaporeans must learn from Marissa Mayer

This girl on PR fire

A

sk every Singaporean business founder how much time and money do they spend on public relations, and the usual answer is “Nothing.” With a limited amount of both resources, entrepreneurs rather worry about building product and doing sales than getting buzz.

However, a review of Marissa Mayer’s time at Yahoo! thus far should reveal that not only is PR important, it is vital for local companies to survive.

It has being a year on since Marissa Mayer started the revolution at Yahoo! – the slumbering Internet pioneer who was slowly slipping out of the public’s consciousness. Nowadays you can’t turn away from hearing about Yahoo! latest venture, acquisition or financial report.

While the jury is still out on whether Mayer has really revolutionized the firm, her presence has definitely put the iconic purple Y! back on the map.

Rewind to June 2012, Yahoo was in chaos: Two CEOs were out the revolving door faster than Yahoo! Mail could load. The last one, Scott Thompson, was in fact put out on unemployment welfare as the scandal broke about him faking his resume. The stock tanked and all hope seems lost.

Marissa Mayer was the breath of fresh air everyone needed. This was scoring brownie points on all fronts. First, it was a coup for

BY PETER YU

Yahoo! to poach a member of the top brass at Internet rival, Google.

Second, Mayer was Google employee no. 20, their first female engineer – putting a deserving woman in the top job in the male-dominated technology industry.

Third, she spent her career focused on developing product, which is what the firm truly needs. It couldn’t get better than this.

Mayer has since revamped many of Yahoo’s core products, like Flickr. Once the biggest photo sharing site, it has in recent years lost ground to Instagram and Facebook. With some love and cash from Yahoo, Flickr is on route to a great comeback. Usage at Flickr has also subsequently increased after the announcement.

While it seems like a move that recedes progress when all other tech companies are flaunting employee perks to retain staff, Mayer wanted to improve collaboration and reduce employees moonlighting. This is another masterstroke to keep the world’s eyes on Yahoo – convincing everyone that they will become even better and leaner. In fact, Yahoo’s employee satisfaction is now at a 5 year high.

People are talking positively about Yahoo! and its prospects, which was impossible to think of just 12 months ago. All the waves of PR directly led to at 73% increase in stock price since Mayer started. Investor confidence is up as the Mayer revolution spelt potential for the business.

Likewise for Singaporean businesses, PR is crucial. Almost all business need to find increasing amounts of money to keep it alive while growing the business. By figuring important angles on how groundbreaking the technology or impact will be - pitch to the press for significant publicity online & offline.

Nothing speaks more volumes to investors if they know of you before the meeting. Their checkbooks will be more open if they saw you on CNBC or read about you in the Wall Street Journal.

At the beginning, businesses will need to increase performance metrics to look good. This means to add customers, usage, revenue and senior employees. Even with a fantastic product but with no ground swell, this will be hard. Being able to get featured on PC World and Amazon Web Services will convince skeptics to give it a shot. It will also help in hiring and retaining staff if they feel the pride to work for a company in the public eye.

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 43

CHRO Briefing We are all aware that dynamic changes in global competition are faster than “people processes” ability.

Think global, hire local Experts explain the importance of recruiting local managers instead of foreign workers.

F

rustrations over skilled foreign workers have taken a new turn. As recruitment firm Hay Group puts it, the debate that was previously focused on how a ready supply of foreign labour has hurt lower-skilled workers, has now shifted to how it strikes at the heart of middle-class aspirations.

This is because, as shown in the recent Budget debate, the spotlight is on professionals, managers and executives (PMEs), and competition they face from skilled foreigners on Employment Passes (EPs), who do not face quotas, Hay Group said.

The Government has promised to address the issue, with the EP framework up for review, and plans to make companies consider Singaporeans first. Yet, while this may reassure Singaporeans, the business community regards the tightening of foreign talent inflows with concern.

“At its heart, the issue of controls on skilled foreign labour is ‘one of balancing the needs of companies against the interests of Singaporeans,” as Singapore Management University (SMU) economist Augustine Tan puts it. Companies - not least multinationals - insist they need access to international talent.

Singapore Business Review caught up with two business leaders who spoke at the Singapore Human Capital Summit 2013 about the importance for firms to recruit local managers instead of foreign workers to delve further in the issue. They also shared how they continue to attract local and foreign talents amidst tight competition.

A systematic approach to personnel training Sri Martono, vice president, and chief corporate human capital development of PT Astra International Tbk shared that at Astra, they believe in attracting both local and foreign talents that are professionally competent as well as culturally fit.

The management, he said, also prefers to groom its future leaders from within, simply because Astra

44 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Competency could be acquired from outside but culture should be cultivated from within.

believes that competency could be acquired from outside but culture should be cultivated from within. “We are all aware that dynamic changes in global competition are faster than “people processes” ability to adapt. Scarcity of talent is everywhere.

Business always runs over organization readiness of leaders supply. Therefore, leaders grooming should be at speed. Organizations should be more agile and think holistically about the integration of tangible and intangible assets. We believe in nurturing our unique culture and keeping the employee empowered will enable us to achieve our sustainable growth,” explained Martono.

Martono bills that Astra develops a systematic approach to create development program through structured trainings, feedback sessions, individual career plan, individual development plan, mentoring, and leadership performance coaching sessions.

Martono also boasts that Astra has the luxury to provide them with field exposures through rotation and assignment across the group. On top of that, leadership, he said is critical as it is part of change management. “Commitment, consistency of implementation and involvement of top management is of “paramount importance, as well as leadership role model,” he said.

Critical human capital Stephanie Gault, managing director, talent and organisation APAC, Accenture said that Asia continues to be a focal point for business growth, as evidenced by the shift towards this axis recruiting more locals than foreigners - by many organizations. Yet, for both companies expanding into Asia and Asian domestic companies expanding externally, human capital remains one of the most critical areas to overcome, said Gault.

“There is a clear supply-demand imbalance, thanks to the region’s immense diversity across cultures, language, and economic maturity factors.

Despite Asia having some of the most populous countries, there is still a dearth of good relevant talent.” According to Gault, Accenture research has found that strong local leadership is one of the core human capital capabilities that differentiate those that succeed in achieving high performance in Asia.

“It is essential both to employee engagement and business results. We also know that at the heart of strong local leadership is a global mindset – taking a global perspective in the design of company structures, processes and values and in the definition of desired behaviours and attitudes of both leaders and employees,” she said.

THEMATIC REPORT: ASIAN AGEING

Asia’s graying not happening evenly

Grow old or die trying

Asia’s heavyweights are in danger of growing old before they grow rich.

C

ountries like Malaysia, India, Indonesia and the Philippines – all of which are just about to hit their working-age population peaks – stand to receive a strong growth push, according to analysts.

Data suggest that gross domestic product (GDP) growth is tightly correlated to working-age population changes. This means relatively faster graying economies like Japan, South Korea and China will suffer from growth hiccups, while emerging economies will expand quickly.

Developed Asia could also decline in relative affluence as emerging economies begin to go through their golden growth periods. But analysts warned that emerging economies have longstanding bottlenecks to investments, education and regulation that could stymie this demographics-led momentum.

Asia rapidly graying Asia as a region is rapidly graying, with the elderly Asian population forecasted to double or even triple by 2050, or about a billion Asians aged 65

46 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

“Asia as a region is rapidly graying, with the elderly Asian population forecasted to double or even triple by 2050.”

years old and up, according to United Nations Population Division data.

CLSA Head of Asian Research Amar Gill attributes this demographics trend to declining fertility rates in Asia.

“As income levels rise, women’s education improves and contraceptives become more common, fertility rates decline. A very significant change in the last 20 years is that fertility rates in developing East Asia have fallen below the replacement level. From 2.5 in 1993, women in Asia ex-Japan region are now having on average just 1.9 children each.”

North and South divide But Asia’s graying is not happening evenly; there is a stark North and South demographic divide when it comes to ageing progression. “Japan was largely the only country that was ageing and shrinking in terms of its labor force and population in the previous decade. But in the coming decade, several Asian countries – including China, Korea, Hong Kong and Thailand – will see their labor force shrink,” said Hak Bin Chua, analyst at Bank

of America Merrill Lynch (BofAML).

World Bank data show that South Korea’s working-age population has been on a steady decline. It hit a peak of 39.72% in 2004 but that statistic has slid to 37.88% as of 2011.

China is expected to hit its workingage population peak by 2015, based on United Nations revised data. Thailand, which is geographically located in Southeast Asia, is an outlier in that it joins the ranks of its Northeast Asian counterparts which will likely see its working-age population shrink over the next decade, predicted Chua.

In contrast, most South and Southeast Asian countries will only start to hit their peaks in several decades, based on United Nations revised data: Malaysia (peaking in 2047), India (2050), Indonesia (2058) and the Philippines (2085). Singapore has managed to delay its working-age population decline due to its still-open immigration policy that assimilates young foreign workers.

GDP growth implications BofAML’s Chua argues that changes in

THEMATIC REPORT: ASIAN AGEING working-age population over the past decade were highly correlated with real GDP growth. “Relationship becomes even tighter if China (an outlier) is excluded from the regression.

China’s GDP growth has been driven by a surge in labor productivity, in part because of its huge labor surplus shifting to more productive areas (consistent with high rural-tourban migration). Singapore, Malaysia and the Philippines should have seen higher average GDP growth because of favorable demographics over the past decade,” said Chua.

But investors should be wary about basing their stock picks on demographics alone due to its less correlated relationship with stock market performance.

“Singapore and Malaysia should have seen asset prices perform better given their demographics (from 2002-12), while Indonesia, India and Thailand stock markets did far better than what their demographics would have implied,” said Chua.

China’s shrinking labor force China’s working age population and labor force are shrinking, which according to CLSA’s Gill, is a “lagged but inevitable result” of the one-child policy introduced in the seventies. He notes that in the last 20 years China’s labor pool increased by 223 million or 28% to just over 1 billion. But in the next 20 years, it will decline in absolute terms by about 45m, or 4%.

China’s graying demographics will allow India to pass over the former as the country with the biggest share of workforce in Asia ex-Japan by 2033.

“Over the next 20 years India’s labor

pool is set to rise to 43% of the region, and overtake China which will slip to 40%.”

China’s shrinking labor force will also cause significant shockwaves across the region in the areas of relative production, consumption and investment patterns.

This includes the increasing price of Chinese labor, which other Asian nations can capitalize on. “This is the opportune time for the Philippines, Indonesia and India if the governments can capitalize on their abundant labor resource and lower labor costs to attract greater foreign direct investment,” said Chua.

But to take full advantage of their demographics, these same countries need to address the prevailing barriers to foreign investments, from stifling legal requirements to regulatory roadblocks.

Chua said there is a danger that the Philippines, Indonesia and India will not be able to use their young, robust demographics to attract foreign investments.

In fact, currently, “the outcome has been more an outflow of workers and talent to a growing diaspora outside their borders, rather than investments flowing in,” said Chua.

Shifting affluence Emerging economies are also seeing fast-declining dependency ratios, meaning a smaller proportion of their population are not in the labor force, putting less pressure on the productive population. This may ultimately lead to a rise in affluence among emerging economies, if historical data is to be believed.

“Spending on food and household will fall while allocations discretionaries such as personal products, healthcare, transport equipment and education will rise.”

“Demographics, expressed in terms of the dependency ratio (DR), have been the key driver of affluence in Asia, through factor accumulation,” said according to Manishi Raychaudhuri, analyst at BNP Paribas Securities Asia. “The developed North Asian economies gained from such factor accumulation until the 1980s, but dependency ratios are likely to increase in these economies secularly.”

Raychaudhuri points out that when Japan’s DR bottomed out in the 1990s as its population started ageing, its percapita income also flatlined.

China’s explosive growth in the past two decades can also be taken as another example of this correlation at work. China’s dependency ratio has been plummeting from mid-70% in 1980 to mid-30% in 2010, which has translated to a massive spike in percapita income from around $150 in 1980 to around $4,500 in 2010.

But declining DR is not the sole determinant of increasing affluence, as shown in the case of India which has struggled to raise its per-capita income even as its DR has also plummeted like China’s.

“India is a laggard because of several bottlenecks to investments, archaic education system, etc,” said Raychaudhuri.

Changing consumption, savings As emerging Asia becomes more affluent, Raychaudhuri foresees a drastic shift in consumption patterns.

Spending on food and household will fall while allocations discretionaries such as personal products, healthcare, transport equipment and education will rise.

Per capita income - developed Asia

Fertility rates (2010-2015) in Asian countries

Source: UNPD, US Census, World bank

Source: UNPD

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 47

THEMATIC REPORT: ASIAN AGEING “The Asian medical tourism industry has been growing at a doubledigit growth rate for the past few years, based on the Asian Medical Tourism Analysis (2008-2012) report.”

Asia’s demographic divide

Source: Bank of America Merril Lynch Global research estimates, UN Population statistics

Graying Singaporeans

According to McKinsey estimates, the average Indian allocated 56% of his total spending to food and beverages, but this has dropped to 42% in 2005 and is estimated to slide to 34% by 2015 and 25% by 2025. Meanwhile, healthcare and transport and education spending will have doubled by 2015. Transport and communications expenses are also set to take up a quarter of the average Indian consumption spending by 2025, from only just 12% in 1995.

This same evolving consumption pattern has progressed further in the fast graying markets of Thailand and 48 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

China, but with distinct nuances.

For example, recreation is emerging as a high spending priority for the Chinese, with allocations for recreation equipment and recreation and cultural services rising to a combined 13% by 2020, from just 5% in 2000.

The average Chinese will also spend an estimated 20% of his budget on food by 2020 from 43% in 2000, down by more than half in just two decades.

Meanwhile, Thailand’s current consumption pattern shows a relatively high priority for transport and communications and leisure, taking up 38% of their total spending, or

even larger than their combined 37% allocation for food & non-alcoholic drinks (32%) and alcoholic drinks & tobacco (5%).

But despite the growth of discretionary spending across Emerging Asia, Raychaudhuri notes that consumer goods penetration levels in the region are still very low compared to other emerging markets worldwide, such as Brazil and Mexico.

Meanwhile on the savings front, CLSA’s Gill foresees a bulge led by a burgeoning middle class: “When an adult enters the working force, he or she initially saves for big-ticket items like a car or a house. Then come children and expenses related to bringing them up. Only when adults are into their 40s and beyond are they able to start saving more meaningfully for their retirement.”

“Especially in developing countries where there are hardly pension schemes to speak of, the need to save for retirement is apparent to those who are in their middle age aiming not to be a burden on their children.”

Increasing healthcare costs Asia is following the European trend of rising healthcare costs as its population starts to age. The increasingly older Asian population can and will start to spend more on treatments and medicines. World Bank data show that as a proportion of GDP, healthcare costs have risen virtually across the board in Asia – although specifically in the ASEAN region, the increase in per capital healthcare cost seems to be more driven by rising affluence than ageing. Medical and health industries, particularly hospital chains and pharmaceutical companies, stand to gain the most from this spike in healthcare expenses, according to Raychaudhuri.

Hospital chains could benefit from increased healthcare tourism, a term coined for patients traveling from Western developed countries to Asian countries in order to avail of less expensive surgery and other treatments. These healthcare tourists are attracted by the lower total cost of performing the surgery or treatment in Asian countries compared to their home countries. Meanwhile, pharmaceutical companies, particularly those in lifestyle drugs, “could benefit doubly because of increasing affluence of the population,” said Raychaudhuri.

OPINION

GEMMA CALVERT

Find out what can cause Singapore companies to lose staff and sales

BY GEMMA CALVERT

V

isitors to Singapore can be under no illusion that this is one of the most efficient service-based economies in the world. The Singapore Government’s investment into the service sector has helped ensure that the very highest standards of efficiency and customer service are encountered at every stage of the tourist’s journey. But as Singapore continues its transition from a manufacturing to a service-based economy (the service sector now accounts for 16% of Singapore’s annual GDP), many businesses are beginning to encounter the familiar challenges associated with the rapid growth in service provision.

Predominant among these is the typical high turnover of staff experienced by the service industry. From service-based SME’s to global international call centers, the demands placed on service staff can be so stressful that some companies are reporting figures as high as 100% staff turnover rates in a single year.

A key factor underlying this problem appears to be the inability of staff to deal with the stress imposed by negative customer interactions. But should companies risk investing in additional training if, at the end of the day, the knowledge base moves elsewhere? A recent study from the field of neuroscience suggests that the solution may lie in better understanding of how the human brain deals with complex social

“It seems we experience greater gratification being of service to others.” interactions.

In a recent study which combined online and lab-based experiment and involving over 1600 people from four different countries, neuroscientists found that the act of delivering good quality customer service not only benefits the receiver, but intriguingly, also delivers measurable positive health benefits for the individual providing that service. During the study, volunteers were connected up to medical equipment that recorded their heart and breathing rates as well as their skin sweat levels. The scientists also measured participants’ subconscious emotional responses using specially designed computer tests while they were exposed to footage of people delivering or receiving different standards of customer service.

The results revealed that receiving and

delivering excellent customer service caused a chain reaction of positive responses in both the provider and receiver’s bodies, increasing their heart rates and perspiration levels as excitement and exhilaration increased, and decreasing breathing rates as anxiety and stress levels were reduced.

But perhaps more fascinating was that providing great service was found to be both physiologically and emotionally more pleasurable than receiving it. Evolution has hard-wired us to be highly attuned to positive social interactions and as such, it seems we experience greater gratification being of service to others than the other way around.

So how can companies leverage these insights in a bid to reduce staff turnover rates? Cognitive behavior theory indicates that by bringing benefits to one’s consciousness, behavior change often follows. It is far more difficult for a customer to continue to adopt an aggressive stance if the service provider on the other end of the telephone, or in-store, does not mirror their behavior. If you want happy sales staff, brain science suggests that making people aware of the feedback loop associated with positive social interactions, will go a long way to resolving the problem of high staff turnover.

The customer is always right, right?

SINGAPORE BUSINESS REVIEW | NOVEMBER 2013 49

DINING

Imported flavors in Singapore

The Lion City is becoming more of a hot pot of cuisines with these three international restaurants.

Oxwell and Co. 5 Ann Siang Road, Singapore 069688 Bringing British quirk to the scene, the core concept is that of an elevated public house, creating a stylish social scene promising artisan wines and handmade spirits, locally foraged ingredients and boutique beers as well as truly world class yet humble cuisine. With the dining room headed by Mark Sargeant, one of UK’s leading culinary talents and Gordon Ramsay’s former executive chef for 13 years, Mark serves up a menu inspired by modern British dishes that are presented in a sophisticated yet modest style.

Sopra Cucina and Bar 10 Claymore Drive, Singapore 229540 Housed in Pan Pacific Orchard, Sopra Cucina and Bar is Singapore’s first Sardinian Restaurant breaking away from the usual Italian classics. The welcoming space inspired by post world war Italy with rustic old tiles and antiques has a restaurant, bar and alfresco dining area. With the head chef hailing from Sardinia, his creations remain untainted by local taste preferences.

Expect unique dishes such as ‘Culurgiones Ogliastini, a variation on Raviolli with potatoes, pecorino cheese and mint and ‘Malloreddus alla Campiodanese’, Sardinian Gnocchi covered in a beautiful pork and rosemary sauce on their extensive menu spoiling you for choice.

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

50 SINGAPORE BUSINESS REVIEW | NOVEMBER 2013

Bochinche 22 Martin Road, #02-01, Singapore 239058 Get a flavor of Argentina in Singapore at Bochinche, injecting a new spark into Singapore’s dining scene with a brand of cuisine that’s hardly run-of-the-mill.

Serving up an Argentinean menu of small plates for sharing, Bochinche is a vibrant expression of enthusiasm, fuelled by Chef Diego Jacquet’s knack for putting together bold flavors with quality products.

The El Bulli trained Chef has tried to break away from the popular notion that the cuisine is only about meat. Instead, the menu buzzes with wellloved signatures such as pork belly, chorizo and prawns “alajo”, Provoleto with almonds and oregano honey; grilled octopus, smoked leeks and tuna mayo, amongst others, not to forget a curated list of wines from around Argentina to complete the convivial experience.