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SALARY SURVEY 2013 SEE WHICH JOBS WILL GET THE BIGGEST RISES

PROPERTY BRIEFING: TIME TO BUY OR SELL?

HUNGRY GO NOWHERE: WHY SO MANY RESTAURANTS ARE FAILING DEBTMARKETS SIGNAL DANGERS FOR SINGAPORE

VENTURE CAPITAL BRIEFING: FOLLOWING THE MONEY

DO FACEBOOK LIKES = SALES? MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

2 SINGAPORE BUSINESS REVIEW | JULY 2013

FROM THE EDITOR This issue of Singapore Business Review brings you

Publisher & EDITOR-IN-CHIEF Tim Charlton

a wealth of information about significant sectors

ASSOCIATE PUBLISHER Laarni Salazar-Navida Assistant Editor Jason Oliver

in the Singapore business and economic scene.

Art Director Jonn Martin Herman

For one, reining in inflation has been a core

Editorial Assistant Queenie Chan

challenge for Singapore and moves to dampen

Media Assistant Daniela Gujilde Editorial Assistant Alex Wong

prices in cars and housing have contributed to a large fall in inflation which is now hovering at just

ADVERTISING CONTACTS Laarni Salazar-Navida lanie@charltonmediamail.com

3% a year.

Rochelle Romero rochelle@charltonmediamail.com

Our channel checks in Singapore’s healthcare sector also revealed that medical groups are on a tear at the moment, with many groups deciding now is the time to beef up and expand in Singapore and abroad. So don’t be surprised if you find your dental clinic since childhood in 60 more locations soon. ADMINISTRATION Lovelyn Labrador accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@charltonmediamail.com

Interestingly, we also found out that Singapore developers are looking into China for expansion as affordability and investors’ perceptions of it are predicted to impact the local market going forward.

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Can we help? Editorial Enquiries If you have a story idea or just a press release please Email: sbr@charltonmedia.com and our news editor will read it. For a personal message to the editor put the word “Tim” in the subject line. Media Partnerships Please Email: sbr@charltonmedia.com and put “partnership” on the subject line and it will forward to the right person. Subscriptions Email: subscriptions@charltonmedia.com Singapore Business Review is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Singapore Business Review can accept no responsibility for loss. We will however take the gains. Sold on newstands in Singapore, Malaysia, Hong Kong, London and New York *If you’re reading the small print you may be missing the big picture    

Our yearly salary survey reveals that job opportunities abound with 5 in 10 employers expecting to increase headcount. Employees, however, must brace for scant salary increase and bonus and expect to get only a measly 5% increase, if they even receive one. We have a lot in store for you in this issue, so start flipping the pages. Enjoy the issue.

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

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

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

SINGAPORE BUSINESS REVIEW | JULY 2013 3

CONTENTS

Courts Asia proves why it’s 18 FIRST still the retail king

BRIEFING 44 CHRO Why parental leaves are

ANALYSIS compelling reasons why Office rents remain resilient

FIRST 10 Sorry, we’re closed -- forever

ANALYSIS the $3m mark

Singapore businessmen hesitate on taking the risky leap to entrepreneur ship, and make wrong product and market decisions.

business

11 Would you like stagflation with that COE?

14 Singapore developers focus on China

24 Compelling reasons why office rents remain resilient

16 Debt markets signal dangers ahead for Singapore

18 Courts Asia proves why it’s still the retail king

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 | JULY 2013

OPINION

20 Singapore startups fail to pass

10 Sick business can be good

12 The wheels on the buses

‘too complicated’

Healthy demand for pocket space in prime grade offices is keeping overall rents from falling.

22 The secret to success: Failure

REGULAR 38 Legal Briefing 40 CMO Briefing 44 CHRO Briefing 48 Life & Style 50 Numbers

34 What you need to know about investing in Asian property

While most people buy homes to live in, many in Asia buy them as investments.

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

ECONOMY

10 most in-demand jobs in Singapore revealed Manpower Singapore has released the results of 8th Talent Shortage Survey, which found that as the 47% of employers in Singapore are experiencing difficulty finding staff with the right skills. Global results of ManpowerGroup’s Talent Shortage Survey reveal 35% of employers worldwide are reporting shortages, the highest level since prior to the global economic crisis.

FROM THE BLOG

After the NTUC May Day Rally 2013, what now Singapore? BY SEE WEE HENG When I first received the invitation to celebrate Labour Day at NTUC May Day Rally 2013 with government and union representatives at D’Marquee, Downtown East, I was a little hesitant. I expected a solemn, formal and probably pretty boring event (pardon me, I am just being frank).

6 SINGAPORE BUSINESS REVIEW | JULY 2013

RESIDENTIAL PROPERTY

STOCKS

How Ben Bernanke’s shocking statements affected Singapore REITs SREITs saw a broad-based selldown, alongside rising bond yields after Ben Bernanke’s statements left the market speculating that QE measures may be withdrawn earlier than expected, according to CIMB. “The defensive nature of the sector will hold up well in a tactically cautious environment while debt maturity is fairly well-staggered to minimise the impact of any spike in interest costs on refinancing.”

Here’s how CEOs of largest companies in Singapore are paid Singapore Business Review compiled the published annual reports of Singapore’s largest publicly traded companies for 2012. We looked for the total remuneration of the chief executive officers found out that DBS’ Piyush Gupta receives the highest compensation package at $9.33 million. He has a basic salary of $1.2 million but received a cash bonus amounting to $3.5 million.

8 types of annoying colleagues in Singapore BY ADRIAN TAN There is a saying that you choose your friends but not your family. So where do colleagues fit in? No one likes being manipulated, backstabbed, or demeaned, so what happens when you have to deal with the office jerk day in day out? There is no escaping the people you spend 40 hours a week with.

Here is a totally different angle on Singapore property investment BY ALEXANDER KNIGHT It’s no secret that the average price of property in Singapore is one of the highest in the world, and there have in fact been no less than seven rounds of cooling measures implemented in recent years by the government in order to prevent a fully-fledged bubble from forming.

Forecast: Total Cloud Cover The biggest cloud event in Asia is your chance to do real business

Organised by:

Asia’s most comprehensive cloud industry event comes to Singapore on the 13th & 14th November 2013. Everyone who is anyone in Asia’s booming Cloud Computing environment will be there. Which is just why you should be there, too.

Participants:

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Why exhibit at Cloud Expo Asia? Here’s just a few compelling reasons:

1. Lead Generation: Put your business in front of the largest gathering of buyers and senior decision makers in Asia.

Education Partner:

2. Launch new products: The perfect platform to entice new customers. 3. Branding: Expose your brand to a new, exciting and wealthy market. 4. Educate your target market: Participate in the largest cloud computing educational programme in Asia and be prioritised for our seminar programme. 5. Keep in touch with existing clients: With 1,000’s of attendees from Asia’s largest companies, we will be targeting your best customers. 6. Networking: Mingle with your peers at Asia’s largest gathering of suppliers and decision makers, analyze opportunities and formulate. If that isn’t an unbelievably good forecast for your business then we don’t know what is. For more information on exhibiting at Cloud Expo Asia 2013 email cloudexpoasia@closerstillmedia.com or call: Andy Kiwanuka Tel: +65 6698 8460 • Mob: +65 8189 3504

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Agenda PEOPLE | PLACES | EVENTS | OPPORTUNITIES

SERVICES

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PLACES

SWISSOTEL MERCHANT COURT SINGAPORE Swissôtel Merchant Court, Singapore is a smoke-free hotel centrally located near the iconic Singapore River, next to the Clarke Quay Mass Rapid Transit (MRT) station. The 476-room property is also within walking distance to the financial hubs (Raffles Place, Shenton Way and Marina Bay). For enquiries and reservations, please call the Reservations team at 6337 9993 or email reservations.merchantcourt@ swissotel.com or visit www.swissotel. com/singapore-merchantcourt 8 SINGAPORE BUSINESS REVIEW | JULY 2013

PRODUCTS

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FIRST RMG’s purchase price is undemanding since medical suites at Novena were launched at S$3,588-3,828psf in early 2010. According to Chow, medical suites at Orchard Medical Specialists Centre and Novena Specialists Centre are currently going for more than S$3,000psf. “Despite the Thong Sia setback, RMG remains keen on having a medical centre at Orchard Road and is on the lookout for potential sites,” adds Chow.

Sorry, We’re Closed – Forever

If you think your favorite restaurant has just disappeared, you might be right. Singaporeans seem to be losing their appetite for restaurant dining, with 537 establishments closing in 2012 alone. Only 686 restaurants opened in the same year, which translates to an average of just under two restaurant openings a day. Indeed, the F&B sector has been seeing alarmingly high casualties. Colliers said Japanese restaurant group RE&S and the TungLok Group, which runs a chain of Chinese restaurants, had to close some of their eateries because of the manpower crunch. Wok & Barrel closed its doors in March 2013 for the same reason. When faced with a 15% rent increase, the three-year-old French bistro and deli along Bukit Timah, Le Bon Marche, decided to shut down in August 2012 for good and transform into an online store. French chef Julien Bombard closed his fine dining restaurant at Fullerton Water Boat House permanently on January 25, 2013 and now focuses on his online Gourmet Shop, which retails largely French food products. It was also recently reported that Thomson V, a mixed development in Upper Thomson Road had a mere 25 of the strata-titled development’s 78 retail spaces occupied in early April, with tenants complaining of dismal trade and poor traffic. Original tenants such as dessert shops My Garden Cafe, and the Ice Shop, and salon EZ Cut closed just months after Thomson V’s retail section opened in mid-2012.

10 SINGAPORE BUSINESS REVIEW | JULY 2013

Sick business can be good business

ingapore’s medical groups are on a tear at the moment, with many groups deciding now is the time to beef up and expand in Singapore and abroad. Q & M Dental, for instance, the largest private dental healthcare group in Singapore, is looking to increase its dental clinics to 60 outlets by 2015. It has also acquired its first general practice medical clinic as a means of diversifying beyond its core dental practice, notes CIMB.

On expansion mode Larger groups are also expanding, with Raffles Medical Group (RMG) commencing construction of its Raffles Hospital extension this year to expand its capacity. This correspondent recently spent a few hours at Raffles visiting a good friend struck down with dengue. With spike cases and more medical tourism, beds are filling up fast. Andrew Chow, an analyst with UOB Kay Hian reveals that the group continues to recruit specialists in various disciplines to build up its depth and width of services. As at 1Q13, RMG had 250 doctors and specialists and the plan is to have 280-300 doctors by year-end.

RMG had 250 doctors and specialists and the plan is to have 280-300 doctors by yearend.

Cost pressures Cost pressures still haunt the healthcare sector as the primary risk. “We see rising cost pressures as the main risk for the healthcare sector, as some of the healthcare companies recorded higher operating expenses as a percentage of revenue for 1QCY13,” says OCBC analyst AndyWong. This was due largely to an increase in staff and rental costs. Companies are then expected to strive to grow their revenues further in order to drive their operating leverage. IHH Group’s Novena hospital is still losing money despite some cost cuts. Novena has about 116 beds that are operational , but so far only a third are occupied. This means it’s unlikely more beds will be added by the end of this year as was earlier planned. The ailing economy in Singapore is seeing demand for elective surgery reduced. But if Singapore is sick, Hong Kong is looking better. In that market hospital charges are typically 20% to 50% higher than Singapore. So it is no surprise that Singapore’s groups are looking to capitalise on the China health tourism market. Gleneagles will open its Hong Kong hospital in late 2016.

Inpatient Admission Volums (Number) PPL - Singapore

Source: CIMB

FIRST The biggest contributor to lower inflation was the fall in COE prices.

Would you like stagflation with that COE?

eining in inflation has been a core challenge for Singapore. Moves to dampen prices in cars and housing have contributed to a large fall in inflation which is now hovering at just 3% a year. The biggest contributor to lower inflation was the fall in COE prices, which DBS economist Irvin Seah notes caught a lot of people by surprise. “It appears that the correlation between the plunge in COE premiums and the CPI inflation has been underestimated. Indeed, the drop in the transport CPI inflation has been the key factor. Considering the fact that average COE premium

has dived by about 20% YoY in April, it probably explains why the headline inflation figure has dropped so drastically,” he noted. Probably a one-off effect But that effect may be a one-off with signs that COE’s are now stabilising at around $75,000. That means that other pressures, especially wage hikes which are expected to come in at 4% this year, will see inflation start to rise again. But that is a problem for next year. In the near term, the point to note is that this major policy change has drastically lowered the trajectory of the inflation profile. “Even if we

maintain the sequential profile of our inflation forecast constant, full year inflation will be significantly lower than previously anticipated due to this policy shift. With this in mind, we have lowered our inflation expectation for 2013 to 2.8%, down from 3.6% previously. The inflation forecast for 2014 has also been recalibrated to 3.6%,” Seah added. Morgan Stanley’s Seen Meng Chew reckons we are seeing a continuation of the “stagflation-type” macro environment of below-trend growth and above-trend inflation for Singapore. “Although a cyclical global recovery in 2H13 could help to lift the small and open economy, the structural DM deleveraging coupled with the internal headwinds from a greying population and a less liberal immigration policy implies that Singapore is unlikely to return to the 8%-9% GDP growth seen during the Goldilocks period of 2004-2007 and that a new growth normal lies ahead,” he adds.

SG: Corrections in COE premiums drove overall inflation lower

Source: DBS

The Chartist: S-REITs becoming less attractive Thje possibility of QE3 “tapering off” has got Singapore markets spooked. The FSTREI Index, a proxy for SREITs, has fallen c15%, according to Barclays. On average, SREITs’ forward yields have expanded by another 30bps with a yield spread of 4.6%. DBS Vickers, on the other hand, believes that there will be higher opportunity cost (or required return) in holding interest rate sensitive instruments like S-REITs in periods of rising interest rates. While their high yields continue to attract interest, thinning spreads over the long bonds make it less attractive in holding these yieldbased instruments.

Historical S-REIT yield / spreads

SREITs market weighted trailing 12M dividend yield spread

Sources: Bloomberg Finance L.P, DBS Vickers

Sources: Normalised for GFC Sep08-Apr09, Bloomberg, Barclays Research

SINGAPORE BUSINESS REVIEW | JULY 2013 11

FIRST

The wheels on the buses

hat was behind the move of the Singapore Labour Foundation to partially sell off its stake in ComfortDelGro? The organisation trimmed its stake from 12% to just 4%. Some have suggested it could be to pave the way for the entrance of a new land transport company in Singapore. Certainly the LTA has recently reiterated the possibility of introducing new competition into Singapore’s transport market. The possibility of opening up the basic bus service industry to competition has been floated by the government since 2008 but it has remained as status quo since then. While the recent announcement over the funding and construction of a second bus depot by LTA seems like a step in the right direction, it was really driven by necessity resulting from additional buses under the Bus Service Enhancement Programme (BSEP), says Lim Siyi, an analyst with OCBC Investment Research. At press time the owners of the stake were not known, but the SLF had the stake for heritage reasons and not for any strategic reason. Still, land transport remains a touchy area in Singapore with calls for greater fare flexibility and subsidies, so it’s not an OFFICE WATCH:

Fast fashion finds its feet easy area for investors like it once was. “Ultimately, the government has to decide the balance between fare increases and the amount of subsidies to grant. Both PTOs are experiencing widening operating losses for their core Singapore bus operations as fares have failed to keep pace with operating expense increases and government subsidies are strictly profit-neutral. Either fares are allowed to increase to match the growth in operating expenses or further subsidies have to be given,” adds Lim. This will be decided by a 13-member fare review committee which convened last year, but whatever the outcome it won’t be easy driving for transport companies.

Certainly the LTA has recently reiterated the possibility of introducing new competition into Singapore’s transport market.

What makes The Co a tenant hotspot? Singapore has always been a popular office location among firms but with many buildings offering the same office concepts, tenants crave for something different. Enter The Co, an 8-storey commercial building located in the CBD area. It features 202 office workstations, 50 co-working desks, 3 floors of breakout spaces and event spaces, 2 meeting rooms, and 1 conference room. With a stunning space design by M Moser, Ministry of Design, and Arcc Holdings, The Co is a steal with co-working desks that can be rented for a day at S$45 and private office suites that can be occupied at a monthly rent of S$800-S$900 per person.

12 SINGAPORE BUSINESS REVIEW | JULY 2013

Singapore may be known as Asia’s luxury fashion hub with posh designer brands along Orchard Road, but a new trend sees Singaporeans wanting faster and cheaper fashion. H&M is opening three new stores to satisfy this demand. The first new store opened on 11 June at the freshly opened shopping centre Jem, followed by another shop in Singapore’s largest shopping mall, VivoCity on 20 June. The third store at Suntec City opened the next day. While the flagship store in Orchard Building still remains the largest at 30,000 sq ft, the three new stores will stand out as full concept stores with apparel for women, men, teenagers, children and babies. Sized at 20,000 sq ft in Suntec City and 15,000 sq ft in VivoCity, these new H&M stores will cover a large area on single floor whereas the JEM store will be spaced out across three levels with a combined space of 7,000 sq ft. H&M gave away gift cards to early birds who queued up during the opening day of each store. First to queue received a shopping gift card worth S$250, second to fifth customers got a S$100 gift card each.

OPINION

SETH LUI

8 ways to get a salary raise in Singapore

BY SETH LUI Founder and Managing Director MakeShake Pte Ltd

his holds true for most companies in Singapore, where I’m based, but the hard truth is that companies do have stereotypes or bias based on family ties or even race, that limits how far you can progress. If you feel your career has no prospect, leave for greener pastures instead of staying as the coffee boy for 20 years. However, if you think you have a shot at promotion, do read on. 1. Ask for a raise One of the most obvious yet overlooked things you have to do is to simply ask for it. In fact, Research shows men are four times more likely than women to ask for a salary raise, and economist Linda Babcock of Carnegie Mellon University says this has a snowball effect. Even a small pay boost will mean bigger annual raises and possibly bigger year-end bonuses which will carry over to a new employer, who is almost certain to ask: What was your last salary? 2. Always give your superiors credit In some way or another, always give credit to those above you. Even though you did the whole 50 page Powerpoint slides and your direct superior merely presented it, let him have the limelight. Let him feel, well, superior. Especially since he is the first gateway to approving any possible progression you have in the company. 3. Have excellent repertoire with co-workers Having good camaraderie with your boss and your colleagues is the fastest track to any promotion, more so than actual capability. The popular guy always gets elected class president. When people like you, they will help you get ahead so do take special care to go beer bonding with your boss and co-workers. 4. Collect performance statistics Start building a portfolio of reasons why you should be given a raise. If your job is not sales related, then look to your co-workers, boss and clients for reviews and areas to improve. Not only will you have ammo for a pay raise shootout, but you will be perceived as striving for improvement and bettering yourself. 5. Be punctual The impression that you don’t take things seriously is perceived when you always arrive

late, especially if your boss is already at his desk and you’re not. If you’re going to be late due to some supernatural event like a zombie apocalypse, do at least let your boss know that ‘hey, zombies are trying to break into my car to get at my brains but I’ll still be at work as soon as I can.’

Work your way to promotion

6. Let others know what you are working on You might be working a 100 hours a week, but it is all for naught if no one knows what exactly you’re working on. Bosses like to see their employees fully engaged in multiple tasks, so let them know that you’re the hardest working human to walk this earth. 7. Under-sell, over-deliver Satisfaction is gained when expectations are exceeded. So lower your superior’s expectations first, and then deliver amazing results that blow his mind. Promise a canoe, then build an ark. Once your boss is constantly impressed by your work, he is going to retain your talents with a more attractive pay package.\ 8. Be aware of your alternatives Always update your personal market value. How much does a similar company value my skills? When you have a next-best-alternative, salary negotiations can be skewed in your favor because when all else fails, you know where to head next. Be confident of your worth and leave if you are indeed being undervalued by your firm. SINGAPORE BUSINESS REVIEW | JULY 2013 13

FIRST Brace yourselves for measly wage hikes in 2014

Singapore developers focus on China

t is not easy being a property developer in Singapore, and despite all the restrictions on purchases, things may even get tougher should interest rates rise. Right now interest rates are below 1% but a more normal rate for Singapore is 4%, as it was back in 2006. Given the high prices of homes now, every 1% increase in mortgage rates would add $600 a month or $7,200 a year to the average mortgage cost. Affordability, and investors’ perceptions of it going forward will continue to impact the local market, reckons Maybank Kim Eng analyst Wilson Liew.

Well-diversified developers This will also affect developers with a large exposure to Singapore. Only CapitaLand, CMA and KepLand have good exposure to property markets outside Singapore. According to Liew, the three developers are well-diversified within China, which account for 40-45% of their individual asset base. They are so well-diversified that based on Liew’s analysis of a 10% residential property price decline and a 50 bps increase in Singapore commercial property cap rates, the RNAVs of CapitaLand, CMA and KepLand are only negatively impacted by 2.3%, 2.8% and 2.2% respectively Singapore now only accounts for ~35%, 34% and 49% of their respective total assets. As at 1Q13, China marks CapitaLand’s most heavily invested market, accounting for 39% of the Group’s assets, slightly 14 SINGAPORE BUSINESS REVIEW | JULY 2013

ahead of Singapore’s 35%.

Dominating China More specifically, China residential and China retail malls under CMA account for 22% and 13% of the Group’s total assets respectively. China accounts for 52% of CMA’s total assets, but meaningful NPI contributions only began in FY12, mainly with the completion of Minhang and Hongkou malls. KepLand is a big builder of townships in China having sold more than 20,000 homes in China since 2000. It still has a pipeline of another >42,000 homes with a total GFA of 7.7 sqm. Currently, it is developing a 100,000 sqm predominantly office project in the heart of Beijing’s CBD, as well as Seasons City. “As the world’s most populous nation with 1.3b people, China’s urbanization rate has consistently grown at ~1 ppt p.a. over the past two decades to 53% as of 2012 and targeted to hit 60% by 2020. There will therefore be significant demand for good-quality housing.”

China marks CapitaLand’s most heavily invested market, accounting for 39% of the Group’s assets.

CapitaLand’s asset allocation (excluding cash) as at 31 Mar 2013

Source: Maybank KE estimates

Next year, Singaporeans will have to face smaller-than-normal pay increases. In a survey of over 190 Singapore-based firms, consultancy firm Hay Group found that the average salary increase for 2014 is forecasted at 4.4%, or lower than the actual average salary increase of 4.7% for 2013. The top 3 sectors with the highest average salary increases of over 5% in 2013 are Life Sciences/Pharmaceuticals and Services, Utilities and Oil & Gas. Looking ahead, the highest salary increases in 2014 will be in Life Sciences/Pharmaceutical, followed by Services and Insurance. “Organisations are feeling the need to manage business cost in a slower economic environment this year and a substantial part of operating business in Singapore is managing the cost of employment,” said Victor Chan, regional general manager for productized services at Hay Group. Chan added that this was a top business priority for nearly a quarter of the surveyed organisations when asked about their organisation’s key business focus this year. The report also showed that the actual average variable bonus (i.e. performance-based bonuses excluding annual wage supplement and contractual bonuses) is 2.3 months for a 12-month period. This is 0.2 months lower than the average of 2.5 months seen in March 2012.

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FIRST

Debt markets signal dangers ahead for Singapore

t has been a great time for Singaporean equity investors, with the STI Index on a roll and blue skies ahead. But there are a number of warning signs that markets may be about to take a turn for the worse. Quantitative easing and the drop of interest rates to almost zero may have helped ailing economies along, but they also pushed investors into riskier assets with higher yields. That may be about to come to an end, and if so will have major implications for Singaporean investors in leveraged debt equities such as S-REITs. So what is going on? Bank of America Merrill Lynch reckons that the trough in US real estate proved the true game-changer for financial markets and the real economy. Ever since, we’ve seen a rotation from safe havens to more leveraged, risky assets.

The real game-changer “Our private client data base has reduced its gold holdings (the world’s favorite “tail risk” hedge) by 30% since late 2011. History shows that major breakouts in equity markets tend to coincide with major inflection points in bond yields. The ideal scenario would be a repeat of the early 1960s, when both equities and bond yields rose in an orderly fashion, a ‘Velvet Rotation’. But risks of a bond crash are high,” noted the bank. A host of “canaries in the bondmine” (mortgages, REITs, utility stocks, lumber), are indicating that markets are getting nervous about 16 SINGAPORE BUSINESS REVIEW | JULY 2013

offshore holdings of Singapore bonds have increased a fair bit but a lot of that increase is due to central bank Rising real and sticky real money inflows. “If interest rates USD/SGD continues to head higher and a we could see more near term pain weakening in long bond positions, however Singapore dollar over the medium term SGS will outperform USTs on technicals. could SGD stands out as having the highest fundamentally correlation historically in Asia to both change the US Treasuries, and the USD TWI. game for Furthermore, it has among the lowest corporates real yields in the world (and negative and property spreads to USTs). investors Both the safe haven bid and FX in Singapore. gains, which motivated inflows even at poor yield levels, are increasingly losing steam. We thus see SGD as vulnerable in this new environment.” Singapore’s vulnerability Rising real interest rates and a weakening Singapore dollar could fundamentally change the game for corporates and property investors in Singapore. Much of South East Asia remains vulnerable to a sudden outflow of cash, the same thing that caused the last Asian Financial crisis. The Malaysian Ringgit and the Indonesian Rupiah are vulnerable given a high percentage of offshore ownership in government bonds, at 47% and 34% respectively. Reserves cover relative to offshore holdings is also the weakest in these two. Singapore and Thailand are next in line with 20% offshore holdings, but have more substantial reserves cover. It is also important to consider the composition of offshore owners reckons Spencer. For instance, 40% of the foreign holdings in Korea are held by central banks, which should be stickier, versus only 20% in Indonesia and likely far less in the Philippines. The canaries are not chirping so loud these days.

QE tapering, and suggest the next move in bond yields is more likely to be up than down. Let’s take a walk down financial history lane. Less than 7 years ago, housing was booming, Treasury yields were above 5% and the share price of Lehman Brothers was $86. Then the roof fell in. Aggressive central bank actions in response to the bursting of one asset bubble often contribute to the creation of a new bubble. The unprecedented 2007-08 collapse in home prices, financial asset prices and the global economy has been followed by an unprecedented (and ongoing) monetary policy response. In the past 6 years, central banks around the world have cut interest rates 515 times, increased global liquidity by $12 trillion and crushed bond yields, notes the bank. When debt goes out of fashion The last year has seen a lot of “hot money” flow into emerging market bond funds which has kept currencies and yields strong (and hence interest rates low), but that may be about to change. Deutsche Bank chief economist Michael Spencer warns that Emerging Markets Foreign Exchange is waking up to the threat of a more “vicious channel” of adjustment, via an unwind of the golden period for emerging markets debt flows. Emerging markets local currency bond funds have received heavy inflows this year, in excess of those preceding the 2011 sell-off. Over the last two years especially,

Canaries in the coalmine (REITs, mortgages, utilities and lumber)

Source: Bloomberg

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FIRST The Analysts’ call

Is Courts Asia safe from profit headwinds for now? CIMB - Kenneth Ng

Courts Asia proves why it’s still retail king

HSBC’s Permada Darmono also said Courts Asia’s SSSG in both Singapore and Malaysia also indicates that underlying operations remain strong. CIMB’s Kenneth Ng reckons Singapore’s strong SSSG should be spearheaded by a large number of housing starts due to be completed over the next 3 years. “The housing imbalance over the next three years should provide rich pickings for Courts,” he adds. But this rosy set of numbers The housing imbalance over mask worrisome implications. It the next three years should provide is important to note that Courts Asia is also Singapore’s largest rich pickings for Courts and Malaysia’s second-largest electrical, IT and furniture According to Maybank Kim Eng’s retailer in terms of 2011 total sales. In Alison Fok, the underlying net profit this market lies the biggest flaw of the was underpinned by stronger sales company’s results with Courts Asia recorded from full-year contributions recording only 3% revenue growth from Bukit Timah and Clementi due to lacklustre sales of Apple stores, as well as the re-launch of the products as well as the temporary Megastore in Tampines. Singapore renovation of Suntec City, a major sales also proved to be stellar as it convention centre for electronic trade jumped 11.3% to S$543.4m. shows. “More importantly, revenue The profit isn’t the only reason growth appeared weak because for the retail mogul to pop the revenue was boosted by a SGD7.5m champagne as the proportion of positive transfer of service charge Courts Asia’s credit sales/total sales income while the same transfer in is also at an optimum level. UOB the previous results amounted to Kayhian analyst Andrea Isabel said that the recent drop in proportion of only SGD0.2m. We think the market credit sales/total sales (from 27% to is concerned about this accounting 22% over three years) is not cause for treatment. Stripping away the service charge income transfer, revenue concern as it has been in line with the would have increased 8% for the company’s tightening credit policy to quarter,” Darmono said. manage risk. ourts Asia has been doing surprisingly well in Singapore – even better than in Malaysia – following its successful Singapore IPO that raised $111m in 2012. Analysts believe that with better profitability in Singapore, the group’s same store sales growth here should significantly outweigh Malaysia’s faster store expansion.

18 SINGAPORE BUSINESS REVIEW | JULY 2013

Given Singapore’s better profitability, its stronger SSSG should outweigh that of Malaysia’s faster store expansion by a significant amount. Malaysia’s retail-store expansion should also deliver less profits because it takes time for new stores to reach maturity. We assume 10% SSSG for Singapore, an increase over FY13 spurred by a spike in completed housing units. Malaysia’s SSSG is assumed to be 6.2%, no change from FY13. While a sustainable level will probably be close to 15,000 as that is the number of new family formation a year, the housing imbalance over the next three years should provide rich pickings for Courts, as the market leader in electronic, household and IT goods.

UOB Kay Hian - Andrea Isabel

We remain sanguine on prospects after the analyst briefing. CAL remains an attractive proxy on robust consumer demand in Singapore and Malaysia. We see the recent profit-taking as an opportunity to accumulate. CAL is Singapore’s largest and Malaysia’s secondlargest electrical, IT and furniture retailer in terms of 2011 total sales. Delinquency rates have been improving over 2007-13. Going forward, CAL expects it to stablise at these levels. We have tweaked our FY14-15F net profit by less than 1% following the release of 4QFY13 results. In addition, we are also introducing estimates for FY16F.

HSBC - Parmada Darmono

Key catalysts for growth intact and strong capital resources an advantage. Growth drivers for Courts (store expansion, credit sales, and higher SSSG) remain intact, in our view. The opening of the Megastore in KL and two new stores in Singapore in FY Mar 2014 put Courts on a strong trajectory to beat its articulated expansion plan. Following the issuance of a SGD125m fixed rate note in May 2013, we believe Courts is in a solid position to grow organically as well as inorganically.

Financial insight

Singapore startups fail to pass the $3m mark

Singapore businessmen hesitate on taking the risky leap to entrepreneurship, and make wrong product and market decisions.

hile Singapore is ranked among the top few nations with the highest level of startup rates, Nanyang Technological University’s Global Entrepreneurship Monitor 2012 found that 7 in 10 people in the city felt that they do not have the knowledge, skill, and experience to start a business. Also, less than a quarter believe there were good opportunities to start a business within the next six months. In comparison, more than half of the respondents in the United States are confident and over 40% are optimist. Amit Anand, founder and managing partner at Jungle Ventures, commented that the results of the survey were probably a reflection of the maturity of the respective ecosystems. “US had a startup culture for over three decades now, and that kind of activity 20 SINGAPORE BUSINESS REVIEW | JULY 2013

“Global Entrepreneurship Monitor 2012 found that fewer people in Singapore are confident of their entrepreneurial knowledge and skills to start a business.”

creates high levels of exposure to various stages of a business lifecycle thus impacting confidence of first-time entrepreneurs. Similarly professional services and other support services such as mentors, advisors are more readily available. It would be interesting to see how the numbers for Singapore have changed over the last few years. I bet they have gone up if not significantly.” Anand said that Singapore’s startup scene is fairly vibrant because raising $100-500k is quite easy so much that it is beginning to feel like a seed stage gold rush. It is a great time to start up something as investors are more willing to back new ideas and businesses, he added. “The climate has changed dramatically over the last 12-24 months, and Singapore is one of the top destinations to start a new

venture. ” Anand noted that startups are struggling to find right lead investors at Series A stages to secure $1-5m funding. “There is plenty of follow-on capital but venture capital (VC) firms in South East Asia seem to be reluctant to lead large rounds. I see a major opportunity for new, boutique funds here,” he said. Jungle Ventures made six investments in the last 12 months, among which include travelmob, a marketplace to help you find alternative accommodations across Asia Pacific; Mobikon, a customer engagement platform forrestaurants and retail outlets; and ShopSpot, a mobile shopping platform. Anand said they are looking for more deals from the travel and fintech this year. Based on his experience, probably a reason why startups fail is either getting the product and market fit wrong or not being able to execute the go-to-market effectively. Lack of funding Frank Levinson, managing director at Small World Group (SWG) Incubator, said that in Singapore and worldwide there exists a surplus of seed level funding and a corresponding lack of 2nd and 3rd round funding. The “ecosystem”, he said, is out of balance in terms of early versus later stage funding here and everywhere. He suggested that Singapore quit having press releases relating to “starts” and focus on exits. “The VC and entrepreneurial community here cannot thrive without there being steady real technology exits.” According to Levinson, Singaporeans are simply more risk-averse than most other people who engage in startups. Some people here, he said, seek leadership more frequently on the grounds of control than real leadership which is derived from the leader’s perceived value by the team when in normal startups leadership evolves and changes. Some, he added, worry more about personal control and ownership instead of focusing on building value in the enterprise and letting that determine their

Financial insight success. “In spite of all the press release to the contrary, there is a real loathing of failure here and that mitigates against people engaging in startups. Finally, we continue to work to mine intellectual property from local sources (Universities and Institutes) but we and others struggle here to be as effective as all feel should be possible.” SWG operates in partnership with the National Research Foundation under their Technology Incubation Scheme. It started 12 companies over the last two years, of which four have failed. Levinson said that 10 of the 12 achieved some form of substantial revenue and four of them received some form of follow-on funding. Of the four companies that failed, Levinson said that one failed because the team could not work together while the three others failed to convince SWG that they could scale successfully in the world outside Singapore. Levinson said that the three failed despite having delivered working product to the market, achieved some revenue and even revenue growth over time. One of these even did have some small follow-on funding of around S$100k. Levinson mentioned that SWG also invests in companies in the USA, and over the past 12 months its investment pace in the USA has been greater than here in Singapore as it becomes stricter in choosing startups to invest in. Levinson said that SWG expects to start another 4-6 companies over the remainder of 2013 but refused to disclose names. Enterprise or consumer? According to Mike Holt, CEO of G2V Accelerator, business to business (B2B) or enterprise startups are hot and venture capitalists are throwing money at them more than consumer-focused startups. Get2Volume (G2V), which is interested in investing in B2B-focused companies, has made seven investments in Singapore companies over the past year. Holt said G2V is interested in healthcare and energy sectors. Included in its portfolio are companies Semitech

which provides the semiconductor devices and gridComm which provides the systems that enable the transformation of the electricity grid into a smart grid. Meanwhile, its company ConnectedHealth has focused on enabling lower-cost healthcare through remote health diagnostics. Other companies include Plunify, Tabsquare, and Sprooki. Holt said that they are looking towards more exciting B2B companies while all the startup buzz we hear about seems to focus on social networking, mobile, and casual gaming startups. According to Holt, enterprise or B2B companies have been the recent rage of the investment community. Citing a study by CB Insights, Holt said that 80% of the technology companies that will likely file for an initial public offering by the end of 2013 are B2B or enterprise. Startups at the pre-stage According to JDFI.Asia CEO Hugh Mason, one interesting trend about Singapore’s startup scene is that until a decade or so ago, if you wanted to launch a tech company idea you might need to spend $1m or more just to find out if there was any demand. A syndicate of Business Angels, he said, can usually only pony up a few hundred thousand dollars at most, so entrepreneurs would have to reach out to VCs very early. That’s all changed with social media, web 2.0 technology, and approaches like the ‘Lean Startup’ movement, said Mason. “You will need VC if you’re going to pilot some new radical biotech health treatment but many business ideas can be tested very quickly and inexpensively, so the risks are much lower and the capital required is well within the range of individual business angels, or even entrepreneurs themselves to access. Instead of dollars being the constraining factor on business innovation, it’s often now access to experience, contacts, and mentoring that matters.” Mason also argued that around the world the traditional model of VC is being questioned because

“Singaporeans are simply more risk-averse than most other people who engage in startups.”

the industry’s “dirty little secret” is that only a very small number of funds actually create great returns for their investors. “Those funds make very good income for the General Partners who set them up (they would typically take 2% of the funds raised, annually, in fees) and they get that regardless of whether they actually deploy the capital into companies or just sit on it. In Asia it feels like there are a lot of funds just sitting on capital and it’s very hard to see what actual ‘venturing’ they are doing!” Mason said that there is pressure for fund managers to start adding some value by rolling up their sleeves and getting more operational, and that is going to be challenging, he said, for a lot of fund managers because the vast majority have no actual experience of running a business. “They are MBAs who know all about corporate finance and structuring deals, but they don’t have a clue how to build real value. It feels like there is a very healthy shakeout beginning.”

VCs: Which industries do you expect to see over/under funded in 2013

Source: Mike Holt , CEO, G2V Accelerator

Seed funding versus Series A funding

Source: Mike Holt , CEO, G2V Accelerator

SINGAPORE BUSINESS REVIEW | JULY 2013 21

opinion

richard branson The secret to success: Failure

I “Failure is one of the secrets to success, since some of the best ideas arise from the ashes of a shuttered business.”

recently hosted the annual Sunday Times Fast Track 100 event at my Oxfordshire home. It brings together leaders from the 100 fastest-growing private companies in Britain, a number of other leading entrepreneurs, and a few aspiring entrepreneurs from the Branson Centre for Entrepreneurship in Johannesburg, and from the British government’s StartUp Loans scheme, which Virgin administers. We spent the day listening to each other and sharing stories of achievement and innovation. There was lots of laughter and some great conversations. Looking at the people gathered around our dinner table, I had a wonderful opportunity to reflect on what makes a successful entrepreneur. I found myself going back to basics: the three key attributes that can make a real difference to a person’s career. 1. KEEP IT SIMPLE The best and most successful ideas are those that improve people’s lives. Their founders often have a simple plan focused on a single product or service – one that is prompted by frustration. Paul Lindley, the founder of Ella’s Kitchen, started his business because he could not get his daughter to eat. He wanted to create a convenient product that would make mealtimes fun for babies and young children, along with their parents. Paul came up with the idea of producing colorful, tactile

22 SINGAPORE BUSINESS REVIEW | JULY 2013

pouches filled with organic meals. The innovative recipes wowed parents and toddlers alike, and took market leaders such as Heinz and Hipp Organic in Britain by surprise, since their rather stale offerings relied on glass jars and traditional flavors. Ella’s Kitchen has captured 19 percent of the market in the United Kingdom and copycats are packaging their products in pouches. As he told his story, it was clear that Paul truly loves his work. He turned his momentary frustration about the difficulty of feeding his daughter into something that is making mealtimes more enjoyable for families. 2. IF AT FIRST YOU DON’T SUCCEED ... Few first ventures work out: It is how a beginning entrepreneur deals with failure that sets that person apart. In fact, failure is one of the secrets to success, since some of the best ideas arise from the ashes of a shuttered business. If you are an entrepreneur and your first venture wasn’t a success, welcome to the club! Every successful businessperson has experienced a few failures along the way. In the United States, most investors will look at an entrepreneur’s past failures before making a decision, not because they are worried about it, but because they want to see that that person can withstand the occasional knock. Resilience is one of the hallmarks of an entrepreneur who stays in business in the long term. Talking with the team who

runs the Branson Centre in Johannesburg, I was heartened by Dylan Jonsson’s story, as it shows that our entrepreneurs are learning from their mistakes and building new ventures. Dylan is a trained chef who started a restaurant, which then failed because of poor planning. However, he has since launched his next venture, A Thyme to Dine, which is a catering business that also sells four types of chocolate balsamic reductions he developed while running the restaurant. This skill in identifying a winning formula despite his despair at seeing his restaurant close marks Dylan as one to watch. 3. ARE YOU HAVING FUN YET? If you don’t like being an entrepreneur, you’re doing it wrong. When you can’t wait to get to work in the morning and you are generally having a good time, there is a far greater chance that you’ll create a positive, innovative atmosphere and your business will flourish. Keith Bete, a Branson Centre entrepreneur, epitomizes this attitude perfectly. He founded Ubuntuism, a clothing venture based on Ubuntu, an African humanist philosophy that focuses on building a peaceful, prosperous community where riches are shared and people are treated with respect. His passion and enthusiasm is infectious: Everyone he met at the conference wanted to buy a T-shirt and learn more about his company.

SINGAPORE BUSINESS REVIEW | JULY 2013 23

ANALYSIS: SINGAPORE OFFICE RENTS

Compelling reasons why office rents remain resilient Healthy demand for pocket space in prime grade offices is keeping overall rents from falling.

he office leasing market in the Central Business District stayed relatively muted in the first three months of 2013 with rents remaining on the downtrend, except in prime or triple A grade office spaces. Research consultancy firm Savills observed that occupancy rates of prime office buildings in the Marina Bay precinct, now at 95%, have surpassed those of other Grade A offices at 93.8% for the first time in seven quarters, thanks to the quick absorption of remaining vacant space in Asia Square Tower 1 and MBFC Tower 3. Tenants of the two buildings include private equity firms and China-based resources and trading companies. First quarter According to Savills, about 489,000 sq ft of CBD Grade A office space were 24 SINGAPORE BUSINESS REVIEW | JULY 2013

“Rents of Premium Grade office space continue to face downward pressure.”

taken up in Q1, in contrast to the 80,000 sq ft in the previous quarter. Leasing deals, it said, continued to be dominated by smaller deals of 10,000 sq ft and less arising mainly from existing tenants’ expansions or flightto-quality. Consequently, Savills explained that together with no new supply during the same period, vacancy rates in most micro-markets fell for the second successive quarter. The declines ranged from 0.5 to 3.9 percentage points, dragging the overall vacancy rate of CBD Grade A office space to 5.9% by March from 7.8% at the end of 2012. Rents In terms of average rents, Savills said that although whole-floor rents have remained unchanged from a quarter ago, the healthy demand for pocket space has pushed up rates. In

fact, Savills reported a turnaround in average rents of CBD Grade A offices after falling for six consecutive quarters since Q3 2011. “Rents of such buildings tracked by Savills edged up 1.2% QoQ from S$8.31 per sq ft in Q4 2012 to S$8.41 per sq ft in Q1 2013. Prime office space rents recorded the biggest quarterly rent growth of 2.9% or averaging around S$10.29 per sq ft while that of the other CBD Grade A offices was marginal at 0.5% QoQ,” said Christopher Marriott, Savills CEO for Southeast Asia. In a separate study, Colliers International also found that with some tenants taking flight to quality, the average occupancy rate for Grade A office space in the Raffles Place/ New Downtown micro-market dipped from 94.5% in Q4 2012 to 93.6% in Q1 2013, while that for Premium Grade office space increased from 88.5% to 90.2% across the same period. Marcus Loo, executive director of office services at Colliers International, said, “Rents of Premium Grade office space continue to face downward pressure and have provided an opportunity for tenants to upgrade to newer premises

ANALYSIS: SINGAPORE OFFICE RENTS with better specifications. We are increasingly seeing more companies rationalising their usage of space; thereby, seeking buildings that offer an efficient floor plate layout.” Knight Frank senior manager Louise Toovey noted that typical large occupiers such as the finance industry are holding back on expansion plans amid uncertainties in the global economy while there is continued interest from smaller occupiers such as legal and commodity firms. Savills’ Marriott explained that on the back of healthy demand for smaller space, and the lack of new supply in the coming quarters, landlords have raised their rents to a higher plateau despite a backlog of unlet and shadow space. Instead of lowering their face rents, some landlords have structured more creative packages to attract the tenants. “In spite of the rental premium for office buildings located in Marina Bay over other CBD locations, take-up has been good as some companies could be less sensitive with rents when location becomes critical to their operations/ businesses,” added Marriott. Deals indecentralised locations Savills said a few big deals were sealed in decentralised location driven by attractive rents and quality builds. Shell and Procter & Gamble leased 120,000 sq ft and 200,000 sq ft respectively in The Metropolis at onenorth, bringing the pre-commitment level for the project to 60% half a year ahead of its completion. Rents in most areas however are either falling or flat. According to Savills, rents were unchanged in the Beach Road/Middle Road and City Hall submarkets. Knight Frank’s Toovey however believes a potential for upside, thanks to small office building ssuch as Prinsep House. She said the building which is currently undergoing some improvements may appeal to sole tenants with the benefit of getting naming rights and use of the whole building. Other areas rose slightly from a quarter ago, with the Shenton Way submarket topping the growth at 3.7% QoQ, said Savills. Toovey also commented that apart

from old units in some buildings that have been vacant for several months, the ongoing construction of buildings such as Oxley Tower and V on Shenton has decreased the appeal of neighboring buildings. As such, building owners are willing to negotiate new leases with incentives such as more rent free periods. In the Orchard Road cluster, Toovey said that rents remain strong as office spaces in buildings like Wisma Atria, Ngee Ann City Towers, and Winsland House are attractive options for existing tenants. Capital values According to Colliers, the office sales market started the year on a positive note, supported by the continued low interest rate environment as well as investors’ search for alternative investment options after the property cooling measures were implemented in the residential and industrial sectors. It added that there are also end users buying for own occupation. It cites that for instance, SBF Centre, a new 99-year leasehold mixed-use commercial development located along Robinson Road, reportedly sold 113 of the 138 office units during its soft launch in February at prices starting from S$3,200 per sq ft. Also, even as investment activity in the office sector moderated in Q1/2013, record prices have been achieved. According to Savills, buoyant take-up of newly launched

“The average capital values of Premium and Grade A office space in the Raffles Place/ New Downtown micro-market continued to hold firm at S$2,640 and S$2,390 per sq ft.”

strata office units such as SBF Center reignited buying interest in the market and drove up prices of older projects. “Caveats showed that the whole 20/F and a unit on the 15/F of Suntec City Tower 2 were sold at S$2,750 per sq ft of strata area. This is the third highest unit price for Suntec City Towers since 2011. In addition, a unit on the 13/F of Samsung Hub was transacted at S$3,150 per sq ft in March, setting another new high. Therefore, capital values of Grade A offices continued to climb for the second successive quarter, up 4.6% QoQ to S$2,667 per sq ft in Q1/2013.” There was also keen interest in the en bloc sales market in 1Q 2013. NTUC Income acquired the remaining 51 percent interest at S$2,371 per sq ft from Goldman Sachs to take full ownership of 16 Collyer Quay, while Guthrie acquired 2HR, a seven-storey commercial building at 2 Havelock Road, for S$1,626 per sq ft (based on net

Upcoming supply of office space

Sources: Urban redevelopment authority, Knight

SINGAPORE BUSINESS REVIEW | JULY 2013 25

ANALYSIS: SINGAPORE OFFICE RENTS lettable area). According to Colliers, the average capital values of Premium and Grade A office space in the Raffles Place New Downtown micro-market continued to hold firm at S$2,640 and S$2,390 per sq ft, respectively, in 1Q 2013 as underpinned by firm demand. Outlook for the second half Going forward, Colliers predicts that office rents may continue to soften in 2013 due to the challenging global economic environment which will

impact leasing demand, coupled with supply pressures faced by the primary and secondary markets. “The potential supply of new office space, between 2013 and 2017, remains at a daunting 9.3 million sq ft. The significant supply of new office space is expected to continue to draw tenants away from older buildings. Hence, there remains the risk of slow absorption of secondary space that has been returned or will be returned in the next five years,” said Colliers. Chia Siew Chuin, director of research & advisory at Colliers

Net demand, net suuply and vacancy rate of CBD Grade A offices, 2002-Q1/2013

Sources: Savilles research & consultancy

26 SINGAPORE BUSINESS REVIEW | JULY 2013

If the fall in office rents were contained, there is potential for office capital values to grow by 3-5 percent in 2013.

International, noted that while office rents are expected to continue to soften in the coming quarters, the decline for the entire year is expected to be capped at less than 5%. Bottoming out Colliers said that although the market saw fewer leasing transactions in 1Q 2013, there was a noticeable increase in the number of Request for Proposals (RFPs) generated since the start of 2013 which demonstrates that tenants are currently exploring different leasing options ahead of their lease expiry. “The RFPs were mainly from companies in the financial services, pharmaceuticals, and information technology industries; and these could potentially translate to more office leasing deals being inked in the next 6-12 months.” It added that pre-leasing negotiations for strategically located new office buildings could also pick up pace in the second half of 2013, as larger occupiers continue to be on the lookout for modern and efficient floor layouts offered by the new buildings to consolidate their office operations. “If the fall in office rents were contained, there is potential for office capital values to grow by 3-5 percent in 2013,” concluded Ms Chia. UOB Kay Hian believes that Grade A rentals could rise 6-10% in 2014 after bottoming out in 2013, with an estimated 3-5 % fall over the next 2-3 quarters. This follows a 12.9% yoy fall in Grade A office rentals in 2012 to S$9.58psf pm. “Given that Grade A office rentals are only 20% off their 2010 lows (S$8psf pm) and are at a 49% discount to their 2007 highs (S$18.80psf pm), we believe there is greater upside potential for office rentals,” said UOB Kay Hian in a report. The research firm added that it continues to see less downside risk for Grade A office rentals as the differentials between Grade A and Grade B office rentals have compressed. “Grade A office rentals are at a 34.7% premium to Grade B office rentals, which is 5ppt higher than the five-year average differential of 40%. We anticipate that 2013 will mark a flight to quality for occupiers,” it said.

THOUGHT LEADERSHIP SERIES 1: TRAINING & DEVELOPMENT

See how Boehringer Ingelheim promotes healthy and happy kids Find out more about the company’s recent CSR initiative for children.

After more than 125 years in the industry, Boehringer Ingelheim remains committed not only to delivering groundbreaking innovations to the pharmaceutical market, but also to corporate responsibility. The ethical principles that have guided Boehringer Ingelheim since it was founded by German entrepreneur Albert Boehringer in 1885 created a culture of corporate and social responsibility and commitment. As such, the company remains one of the most successful family-owned pharmaceutical companies globally. With its its principle of bringing “Value through Innovation,” Boehringer Ingelheim’s success can be largely attributed to its strong foundation in research and development, which continues to be the major driver of innovative, new medicines for the treatment of diseases with an unmet therapeutic need. But further to that, the company also has, for generations, adhered to its ethical principle in all its activities. It is Boehringer Ingelheim’s goal to act with long-term responsibility and in a value-based manner. Helping kids get healthy Boehringer Ingelheim recently embarked on a kiddie CSR that promotes healthy and happy living for children. As one of the major supporters of the Asian Festival of Children’s Content, BI launched the book “Healthy Kids. Happy Kids: The Magic of Cycling.” Conceived by social entrepreneur and cycling enthusiast Lyndon Yeo, the book is a captivating collection of quotes and sayings

by pediatricians, child psychologists, doctors, child experts, family counsellors, educators, and parents that aims to inspire children to be healthy and happy in Singapore and beyond. The book was launched at the event held at the National Library Building in 25-27 May 2013 along with other children’s books. People who purchased a book during the book launch also got a Pharmaton Kiddi CL goodie bag. Part proceeds from the launch of the sales of this book will be donated to the National Book Council of Singapore, a non-profit organisation in support for the Asian Festival of Children’s Content (AFCC). The AFCC is a festival that brings together content creators and producers with parents, teachers, librarians and anyone interested in quality Asian content for children around the world. It provides a great opportunity for writers, illustrators, editors, publishers, agents, distributors, parents, children, teachers, and librarians to meet, learn, develop their craft, and discover business opportunities through a wide variety of professional conferences, master classes and workshops, rights fair and media mart, and public events. Leveraging on the 10-year success of the

“Boehringer Ingelheim’s success can be largely attributed to its strong foundation in research and development.”

highly popular Asian Children’s Writers & Illustrators Conference, the National Book Development Council of Singapore expanded the said conference to form AFCC which has emerged as a very popular professional and trade event since 2010. AFCC impacts 1.5 billion children in Asia as well as their parents, professionals, and businesses involved in their development. Boehringer Ingelheim aims to tap into these children through launching a book encouraging them to be healthy and happy. Pharmaton for kids Pharmaton offers solutions for every child’s optimal growth and well-being. For instance, Pharmaton Kiddi contains carefully selected vitamins, minerals and key nutrients that are so important for growth, all in optimal doses for maximum safety and efficacy. The special Pharmaton Kiddi syrup formula also has Lysine and a great-tasting orange flavour is suitable for infants and children aged 1 or older. For best effects, Pharmaton Kiddi Syrup should be taken each day during or after breakfast. Chewables are also available and specially developed for children 4 years or older. Because of the vitamins, minerals and trace elements in Pharmaton Kiddi, a child’s metabolism is greatly strengthened. Vitamins of the B-group also help to alleviate stress, including stress caused by school, and have beneficial effects on memory and concentration. Pharmaton Kiddi also restores children’s appetite as it contains Lysine. SINGAPORE BUSINESS REVIEW | JULY 2013 27

SALARY SURVEY 2013

Jobs a plenty but raises remain elusive

Expect plenty of job opportunities in 2013, but scant salary increases and bonus loom.

mid all the talk of a global economic slowdown, jobseekers in Singapore need not worry as this year’s salary survey reveals that the employment market is predicted to be robust in 2013. Singapore remains a hub for companies’ regional operations fueling optimism, with over half of employers surveyed (52%) for the H1 2013 Michael Page Singapore Employment Index believing that current business conditions are satisfactory. A positive volume of job opportunities is therefore expected in the professional employment market during the first six months of 2013.

They are only likely to get a measly 5% increase, if they even receive one.

Jerome Bouin, Managing Director of PageGroup in Singapore, reveals survey findings where almost half of respondents (46%) expect to increase headcount in their company, with 53% indicating they are likely to boost staff numbers by up to 5%. This new headcount is most likely to be attributed to the operational function of the business, according to almost half of surveyed employers (47%). Employment trends Michael Smith, Randstad Country Director for Singapore, says the increased business confidence in Singapore is encouraging

headcount and investment increases, particularly among companies in the banking and financial services, information technology and life science/ biotechnology sectors. “Generally, there is a clear focus among Singaporean employers to acquire the leadership skills to take their business to the next level,” notes Smith. Business leaders, he adds, are also determined to increase productivity, realise cost savings and innovate. Along with these measures, some organisational restructuring is occurring. But even though hiring in the finance, accounting and banking sector is strong, Stella Tang, Director of Robert Half Singapore, says it is not overly buoyant. She notes that while demand for finance and accounting professionals remains strong, there are pockets of the economy where hiring activity is greater. Energy, ICT, FMCG, real estate and pharmaceutical are some sectors where demand is very strong, reflecting the level of economic activity companies are enjoying. “With shifting regulations, hiring is expected to remain robust for risk and regulatory professionals. Financial controllers with specific industry and product knowledge, finance business partners, internal audit, regulatory reporting and tax professionals are also in demand,” says Tang and adds that the growing Asian banks are expected to be the most active in the job market in 2013. Salary increase and bonus Finance, accounting and banking professionals should not keep their hopes high for big pay hikes as they are only likely to get a measly 5% increase, if they even receive one. However, Tang reckons employees switching companies may do a little better and receive salary increases of up to 10%. Only high-demand staff from a few selected sectors can have the negotiating power for higher increases. “Some employees such as risk and compliance professionals are in high demand by many

SALARY SURVEY 2013 companies and can expect better than average salary rises.” She adds that bonuses will be more subdued this year compared to last year. Many companies will still pay bonuses, but increased payments will be the exception rather than the rule as many companies are expected to maintain the same bonus levels as last year. Meanwhile, findings of PageGroup’s 2013 Singapore Salary & Employment Forecast reveal some 60% of survey respondents expect skill shortages will cause salaries to rise above inflation in the next 12 months. However, Bouin warns that a slowing in the financial services sector has caused a slowing of wage inflation as financial services jobseekers lower the importance on salary due to the reduced supply of these roles. Expanding sectors should deliver the most potential for salary increases in the second half of 2013, says Smith. However employees shouldn’t assume a clear-cut sum as increases as well as bonuses will be awarded on a case-by-case basis. “Employees should be proactive in discussions with their managers to ascertain what is required to achieve the bonus they are hoping to achieve, especially in light if the cost versus productivity that many organisations are focused on,” suggests Smith. Challenges in 2013 Foreigners who have no working experience in Asia and are finding a job in Singapore will be in for a rough ride as local professionals are preferred. But jobseekers, whether foreigners or locals, will have to adapt to the budget constraints of employers and lower their expectations when making salary increase requests. Talent attraction will continue to be a focus for employers in the first six months of 2013 according to findings in the H1 2013 Michael Page Singapore Employment Index and almost half (47%) report they are likely to offer competitive salaries in an effort to acquire new staff. A further 27% of respondents indicate

scope for career development will be offered to attract employees to their business. According to Bouin, talent attraction and retention remain a challenge for employers due to skill shortages, with regional knowledge and expertise likely to be difficult to find. He adds that most of the surveyed employers (40%) report that achieving business goals within the allocated budget is their key business concern. Despite limitations on budget, this reflects the desire of employers to continue driving their business forward in the stable business environment. On the other hand, companies face the risk of missing out on the best candidate for the job as the approval time for new hires take much longer. Since employers now have to go through many levels of approval to get an answer on a new hire, the best candidate may just take another offer instead of waiting for too long. “Our advice for employers is to look at making an offer quickly if someone with a good fit comes along to avoid losing the talent to a faster acting competitor,” suggests Tang. Diminishing talent pools also mean employers will need to further widen their search and consider training less-tapped talent sources such as flexible/ contract workers, return-towork mothers and the mature workforce. “Employees looking to make the move may need to re-skill or up-skill in order to meet the changing requirements of some roles, as companies try to move to more productive, efficient workforce models,” says Randstad’s Smith. Skills shortage A significant skills shortage is evident for people with risk and compliance experience. In the last 12 months Robert Half has seen a 50% growth in demand for risk and compliance experts in the financial services industry, and an 80% rise in demand for risk and compliance professionals from companies in commerce and industry. “The level of demand for risk and compliance specialists is unprecedented and

Jerome Bouin

Stella Tang

Michael Smith

directly mirrors the explosion in new regulations. Companies are battling to recruit professionals with the right skills in order to keep ahead of the changes,” says Tang. Smith concurs and reckons talent remains in high demand within banking and financial services, particularly in IT security, risk, compliance and legal departments. “The life science/biotechnology sector has shortages in the clinical trial, regulatory affairs and sales arenas, and within the information technology sector, Cloud (SAAS, IAAS & PAAS), storage and sales professionals are hard to find,” he adds. There has been strong demand for staff from corporate organisations across multiple sectors as an increasing number of companies expand their operations into Singapore, setting up a base to do business within the Asia Pacific region. Aligned with this trend, notes Bouin, has been the increase in regional role opportunities across all sectors, which is increasing the demand for talented professionals with broader Asia exposure and experience working in the China, Malaysia or Japan markets. There is also a particular demand for highly skilled employees in the engineering and supply chain sectors.

In the next 12 months, how much do you expect salaries to increase for existing financial services employees?

Source: Robert Half survey of 450 senior financial services leaders in Asia

SALARY SURVEY 2013 FINANCE Role

Years of experience

General

3-5 Years

5-10 Years

10-15 Years

More that 15 Years

Salary

SG$’000

Accounts Payable Accountant

45–60

60-80

Financial Accountant

50-65

65-100

Cost Accountant

50-65

65-80

Credit Analyst

50-65

65-90

Group Accountant – Consolidation

50-70

70-100

Financial/Business Analyst

50-80

80-100

Accounts Payable Manager

70-90

90-120

Finance Manager (small/medium organisation)

80-100

90-120

120+

Finance Manager (shared services centre)

80-100

100-120

120+

Credit Manager

80-100

100-130

130-150

Costing Manager

80-100

100-150

Financial & Planning Analysis Manage

100-130

130-150

150-200

200+

Finance Manager (large organisation)

100-130

130-180

180+

Financial Controller (small/medium organisation)

130-150

150-180

180+

Credit Director

130-150

150-180

180-220

220+

Financial Controller (shared services centre)

130-150

150-200

200+

CFO/Finance Director (small/medium organisation)

180-200

200-230

230-280

280+

Financial Controller (large organisation)

160-200

200-250

250+

Finance Director (shared services centre)

200-220

220-250

250+

CFO/Finance Director (large organisation)

220-250

250-300

300-350

350+

Specialist Pricing Analyst

50-65

60-100

Treasury Analyst

60-80

80-100

Tax Analyst

60-80

80-110

Internal Auditor

65-90

90-130

Pricing Manager

80-120

120-150

150+

Revenue Recognition

80-120

120-180

180-25

Corporate Finance Manager

90-120

120-160

160+

Treasury Manager

100-120

120-180

180+

Internal Audit Manager

100-130

130-150

150-200

Tax Manager

130-160

160-200

200+

Corporate Finance Director

180-200

200-250

250+

Treasury Director

180-200

200-250

250+

Internal Audit Director

200-220

200-250

250-300

300+

Tax Director

200-250

250-300

300+

Public Accounting (Big 4) Auditor

50-65

65-100

Tax Associate

55-65

65-100

Audit Manager

85-120

120-150

Tax Manager

85-120

120-150

Tax Director

150-180

180-220

220+

Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

60-95

85-150

150-220

270+

FINANCE 2

Central Finance Management Reporting/Business Finance

30 SINGAPORE BUSINESS REVIEW | JULY 2013

SALARY SURVEY 2013 FINANCE 2 Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

60-95

85-150

150-220

270+

Costing Controls/Analytics Financial Reporting

60-95

90-150

150-220

270+

Tax Accountant

80-100

100-170

170-220

300+

Quantitative

60-95

85-130

180-250

260+

Price Testing

60-95

85-130

180-250

260+

60-95

90-160

160-240

260+

Valuations

Finance Projects Business Analyst Product Control Cash

60-95

95-130

160-250

260+

Equities & Finance

60-95

95-130

160-250

260+

Commodities & Derivatives

60-95

95-130

160-250

260+

Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

AUDIT, COMPLIANCE & RISK

Audit Internal Audit

60-90

90-145

175-240

250+

IT Audit

60-90

90-145

175-240

250+

60-80

80-145

145-240

250+

Compliance AML (Audit Money Laundering) MAS Compliance

60-80

90-120

130-240

250+

TTM (Transaction Trend Monitoring)

60-90

90-145

175-240

250+

Front Office Advisory

60-100

100-170

180-250

250+

Risk Market Risk

60-90

100-120

120-250

250+

Credit Risk

60-90

100-120

120-250

250+

Operational Risk

60-90

85-130

170-240

250+

Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

60-85

85-140

140-230

220+

50-80

80-120

120-200

200+

OPERATIONS

Operations Project Management Middle Office Client Servicing Back Office Settlement

45-65

65-120

130-200

200+

Corporate Actions

45-65

65-120

130-280

200+

Reconciliation

45-65

75-120

130-200

200+

Collateral Management

45-75

75-120

130-180

190+

Fund Administration

45-75

75-120

130-180

190+

Documentation

45-80

80-120

130-200

200+

Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

FRONT OFFICE

Investment Banking Debt Capital Markets

60-140

110-160

160-220

220+

Equity Capital Markets

60-140

130-160

160-220

220+

SINGAPORE BUSINESS REVIEW | JULY 2013 31

SALARY SURVEY 2013 FRONT OFFICE Role

Associate

Associate Vice President

Vice President

Managing Director

Salary

SG$’000

Private Equity

100-150

150-190

190-250

220+

Investment Banking

100-150

150-190

190-250

220+

30-80

80-110

110-140

140+

Corporate/Institutional Banking Credit Analysis Corporate Bankers Transaction Banking Sales

40-80

80-120

120-160

160+

Transaction Banking Product Management

40-60

60-100

100-150

150+

Corporate Banking Relationship Manager

40-90

90-130

130-180

180+

Fund Management Institutional Sales & Marketing

45-110

110-140

140-170

170+

Portfolio Managers

60-100

100-140

140-200

200+

Research

60-100

100-150

150-200

200+

Role

3-5 Years

5-10 Years

10-15 Years

More that 15 Years

Salary

SG$’000

40-60

60-100

100-130+

130+

HUMAN RESOURCES

Banking & Finance Payroll Specialist Mobility Specialist

50-70

70-100

120-150+

150+

HRIS Specialist

50-85

85-135

135-150+

150+

Learning and Development Specialist

60-100

100-150

150-180+

180+

Recruitment Specialist

60-100

110-180

150-180+

180+

HR Generalist/Business Partner

60-110

110-180

180-215+

215+

Organisational Development

60-110

110-200

200-250+

250+

Compensation and Benefits Specialist

60-120

120-220

200-250+

250+

300+

Head of Human Resources COMERCE & INDUSTRY Payroll Specialist

40-60

60-90

90-110+

110+

Mobility Specialist

50-65

65-95

95-130+

130+

HRIS Specialist

50-80

80-120

120+160+

160+

Recruitment Specialist

55-90

90-135

135-165+

165+

Learning and Development Specialist

55-90

90-135

135-165+

165+

Organisational Development

55-100

100-150

150-220+

220+

HR Generalist/Business Partner

55-100

100-160

160+

Compensation and Benefits Specialist

55-120

120-180

180-230+

230+

220+

260+

Role

3-5 Years

5-10 Years

10-15 Years

More that 15 Years

Salary

SG$’000

Head of Human Resources SALES & MARKETING

Consumer Products Visual Merchandiser

40-70

50-80

90-+

Marketing Communications Manager

50-80

70-100

90-150

130+

Brand Manager

60-80

80-150

Product Manager

60-80

80-150

120-200

80-150

Sales/Key Account Manager

60-90

Marketing Manager

80-110

100-150

140+

Marketing Director

120-220

180-280

220+

Sales Director/Regional Director

220-280

250+

General Manager

150-250

250-350

350+

32 SINGAPORE BUSINESS REVIEW | JULY 2013

SALARY SURVEY 2013 SALES & MARKETING Role

3-5 Years

5-10 Years

10-15 Years

More that 15 Years

Salary

SG$’000

Healthcare Sales/Medical Representative

40-60

Product Manager

60-80

80-110

100-130

Sales Manager

60-80

90-110

150+

Marketing Manager

60-90

100-150

120-170

170+

Sales Director

150-220

200+

Marketing Director

180-220

220+

Business Unit Director

180-300

300+

General Manager

120-180

180-300

300+

50-80

70-130

90-150

220+

Technology Communications Manager Product Manager

60-100

80-150

120+

Direct Marketing Manager

60-110

80-130

120+

Account Manager

70-90

90-130

130-180

Marketing Manager

80-110

100-150

140+

80-120

120-180

150-220

Channel Sales/Direct Sales Manager Marketing Director

120-220

150-280

200+

Sales/BD Director

150-220

220

General Manager

220-290

300+

Business Services Media Relations

50-80

70-130

90+

Public Relations Manager

50-80

70-130

90-150

150+

Corporate Affairs/Communications

50-80

70-130

90-150

200+

90-150

120-220

Marketing Director

100-150

120-220

220+

Head of Marketing Communications

150-220

220+

Role

3-5 Years

5-10 Years

10-15 Years

More that 15 Years

Salary

SG$’000

Marketing Manager

BANKING & FINANCIAL SERVICES

Development, Design & Architecture Analyst Programmer Lead Analyst Programmer

45-55

55-65

70-80

Architect – Applications, Solutions, Systems, Data

125-135

Enterprise Architect

130-155

Application Development Manager

140-160

Testing Test Analyst

45-55

55-65

Team Lead - Testing

65-90

Test Manager

120-135

45-55

55-65

Database Management Database Administrator Senior Database Administrator/Data Analyst

70-80

Data Warehousing/Modelling Specialist

90-110

Data Architect

120-140

SINGAPORE BUSINESS REVIEW | JULY 2013 33

ANALYSIS: ASIA PROPERTY

What you need to know about investing in Asian property While most people buy homes to live in, many in Asia buy them as investments, writes DBS Chief Economist David Carbon.

ften they are blamed for driving house prices higher than they ‘should’ be. Singapore and Hong Kong are home to Asia’s wealthiest investors and highest home prices. Is there a connection? More generally, from an investment return perspective, how have home prices compared to, say, equities? In Hong Kong, equities and property have offered similar returns over the long haul. Since 1985, equities have risen by 10.6% per year, a tad more than the 9.8% return delivered by property. Rental payments and equity dividends are missing from this picture but assuming they are broadly similar then the conclusion wouldn’t change: from an investment point of view, property does not appear overvalued rela-

34 SINGAPORE BUSINESS REVIEW | JULY 2013

“Singapore property prices do not appear overvalued relative to equities.”

tive to equities. Ditto for Singapore In USD terms, (to make returns comparable with Hong Kong), both property and equities have returned 8.1% per year since 1985. Assuming again that rental payments and equity dividends are similar, then like Hong Kong, Singapore property prices do not appear overvalued relative to equities. As long as we have these long-run pictures in front of us, it’s worth making a couple of additional points. The first regards Hong Kong, and the fact property prices there have climbed so much more in recent years than in other countries. It seems reasonable to view much of Hong Kong’s rise as a rebound from the SARS epidemic

that peaked in mid-03. Yes, prices have soared by 4x since then but compared to 1997, they are up by only 40%. Moreover, from a purely technical / price perspective, 1997 does not appear overvalued looking back over the data today. Similarly for Singapore. It is often exclaimed that property prices (and rents) have soared of late. And they are, in fact, up by 55% since mid-09. But that puts them only 18% higher than 1996 levels. Of course one could argue that Singapore’s prices were ‘too high’ in 1996. To some extent we’d agree. But deflate the 1996 levels to something ‘more reasonable’ and today’s prices still don’t seem out of line with what prevailed 17 years ago.

ANALYSIS: ASIA PROPERTY How much is that house in the window? Price changes are one thing. What about prices themselves – the levels? How much does a house cost in Chinese yuan, or Indonesian rupiah or Sing dollars? And can anyone afford to buy one anymore? Asia’s houses aren’t cheap, that’s for sure. The average 100 sq meter (1055 sq ft) home in Hong Kong would run you US$1.4 million today. And that’s not a big house, either, even by Asian standards. But it’s already so expensive that the average family in Hong Kong lives in a 60 sq meter house instead. That’s barely one quarter the average US home size (208 sq m / 2200 sq ft). Prices are lower in Singapore but the average 100 sq meter home will still run you US$870k. In Taipei, 100 sq meters costs half a million USD and in Bangkok, $180k. In spite of all the hoopla, China is still cheap. A 100 sq m home costs less than $100k. A bargain at twice the price? Perhaps. But much of the apparent economy owes to the China figure being a national average. A home in Beijing or Shanghai would cost 3 times more. That’s still cheap compared to Taipei, HK or Singapore and only 30% more expensive than Bangkok. By this gauge, China doesn’t appear overpriced at all. Homes are still cheapest in Malaysia ($42k per 100 sq m) and the US ($85k), where land is abundant. Again,

though, these are national prices; houses in Kuala Lumpur or New York City would cost 2.5x-4x more. How many years to buy a house? Numbers are just numbers until you put them next to something, like wages or income. How many years do you have to spend behind a desk in Singapore or Bangkok before you can buy one of these houses? That’s the ‘real’ price of a home (and one measure of the ‘real’ wage). We’ve already seen that Hong Kong’s houses are by far the most expensive in Asia in nominal dollar terms. But the gap is even wider in real terms. In Hong Kong, it takes almost 40 years for the average person to buy the average 100 sq m house. That’s 2.5x longer than it takes in China. And here, measures are not being distorted by national averages. Prices in Shanghai may be three times the national average but so are wages. Hong Kongers really do have to work 2.5x longer than they do in China before they can buy that 100 sq m home. This puts a whole new spin on ‘real’ income. Hong Kong is purported to be far richer than China, and most other places in the world. But in terms of houses/housing, Hong Kong’s ‘real’ wages are 2.5x lower than China’s! Elsewhere in Asia, ‘real’ wages in housing terms are comparable to China’s. It takes the same number of years (15) for the average Singaporean to buy a 100 sq m home. Ditto for

“Plainly, something’s missing – housing prices alone, either in nominal or ‘real’ terms, tell us nothing about what’s about to blow.”

Thailand. Prices are cheaper (real incomes are higher) in Taiwan, where it takes only 9 years to buy a home. Incomes are higher yet in Malaysia (4 years to buy a home) and the US (1.7 years). Housing compression It comes as no surprise that where housing is expensive, people live in smaller houses, and viceversa. In Hong Kong, where it takes 40 years to buy a 100 sq m home, people live in 60 sq m homes instead. In Singapore and Taipei, the norm is in fact 100 sq m. In Malaysia, where houses are cheaper, people opt for 130 sq m homes. And in the US, where housing is the cheapest of all, 208 sq m is the norm. When you recalculate how many years of work it takes to buy what people actually buy, the expenditure range gets compressed. At the high end, Hong Kong’s number shrinks to 23 years from 39; at the bottom end, the US number stretches to 3.5 years from 1.7. But it’s still a wide range and it begs an immediate question. Real home prices as a bubble gauge If Hong Kong’s house prices are so high, and US prices are so low, why did the biggest bubble cum collapse in 100 years occur in the US and not in Hong Kong? Plainly, something’s missing – housing prices alone, either in nominal or ‘real’ terms, tell

Singapore - property prices and equity markets

House price to income ratios times, median home price to per capita GDP, ‘12 - 1Q13

Source: DBS Group Research

SINGAPORE BUSINESS REVIEW | JULY 2013 35

ANALYSIS: ASIA PROPERTY HK and SG - house price to income ratio

Source: DBS Group Research

us nothing about what’s about to blow. That hurts. If you can’t compare Hong Kong or Singapore to Thailand or the US, how do you get a feel for risk? You do the only thing left: compare Singapore today with Singapore yesterday, Thailand today with Thailand yesterday, and so on. Let’s start with Asia overall. We began this report by showing a chart of Asian property prices – reproduced below left for convenience – rising to US crisis levels and asked if Asia might be headed for a crash too. Deflating prices by incomes the answer would seem to be ‘no’. Asia’s home prices have risen rapidly since 2000 but incomes have risen even faster. Today, home prices are 22% lower, relative to incomes, than they were they were back in 2000. By this gauge, Asia has little to fear on the property front – homes are become more affordable, not more expensive. Importantly, this is true for most individual countries, not just for the average. In Singapore, price:income ratios have drifted upward a little bit since 2006 or 2009 but not by very much. Prices are 10% higher than they were in 2006, but they are 15% lower than they were in 2000. In the 5 years since 2007, prices have essentially run parallel to incomes. Asia’s exceptions are Taiwan and Hong Kong. The situation is more serious in Hong Kong. There, prices are up by 78%, relative to incomes, 36 SINGAPORE BUSINESS REVIEW | JULY 2013

compared to 2000 levels. When affordability drops so far so fast, something needs to be looked at. The first thing to check is whether 2000 is a good base year for comparison. If one takes a longer-term view, for example, does the picture change? The answer is, yes to some degree. Expensive housing Prices (relative to incomes) today are no higher than they were in 1997 and not much higher than what prevailed for the six years between 1991-1997. One could argue that the Asian financial crisis of 1997 brought prices down to where they “ought to be”. But that’s too simplistic. The Asian financial crisis was not about Hong Kong (or Singapore). It was about Thailand, in the first instance, and then Malaysia, Indonesia and Korea. The drop in currencies values and asset prices in Singapore, Hong Kong and Taiwan was collateral damage – spillover from the “Crisis-4” countries. Hong Kong, Singapore and Taiwan weren’t the center of anybody’s attention. The question remains: were prices in Hong Kong too high in 1997 (on the cusp of the Asian financial crisis) or too low in 2003 (at the peak of the SARS epidemic)? Mostly the latter, we think, but housing there is still among the most expensive in the world, in absolute terms and relative to income. Home ownership rates for

“Asia’s housing debt as a percentage of income has risen steadily over the years.”

residents are only 59% compared to Singapore’s 90%, a fact that is surely related to affordability and probably to a less equal income distribution as well. Thus, while from a financial market perspective, Hong Kong’s housing situation is probably not best described as a bubble, social tension related to housing affordability appears to be on the rise. Leverage Housing risk isn’t necessarily about prices per se. In the US, the bigger problem was the underlying build up of leverage and debt, which ultimately could not be sustained. How does Asia look from a debt perspective? How burdensome are housing payments today and how burdensome might they become once interest rates start to rise? Who in Asia is most vulnerable to a potential ‘interest rate shock’? Asia’s housing debt as a percentage of income has risen steadily over the years. For the most part, that’s normal. Housing is a ‘superior’ good. As incomes go up, housing expenditures tend to go up even more. The fact that housing debt, even as a percentage of income, is rising across the region is not, by itself, cause for alarm. As always, it’s a question of ‘how

ANALYSIS: ASIA PROPERTY far how fast’ and whether the debt can be serviced in bad times as well as good. In Singapore and Hong Kong, Asia’s richest countries, housing loans have grown to about 45% of GDP. Singapore’s debt has clearly grown faster than Hong Kong’s but Singapore’s per capita income has grown faster too. Back in 1967, both countries had a per capita income of US$5200 (at today’s prices and exchange rates). Today, Singapore’s GDP per capita is US$57k, 50% higher than Hong Kong’s US$38k. Debt has risen steadily in China and Korea too, though it’s much lower than in the wealthier economies. China’s debt load is about half as large as Korea’s; Korea’s is two-thirds as large as Singapore’s and Hong Kong’s. Beyond illustrating the ‘superior good’ aspect of housing across countries, the key message of this is that US housing debt, even 5 years after the crisis, still stands at 85% of GDP – nearly twice as high Singapore, Hong Kong and Taiwan, and 3x to 5x higher than other Asian countries. High debt/leverage is what caused the US bubble and its collapse. When interest rates rose –

Fed funds rose by 425 basis points between mid-04 and mid-06 – borrowers found it increasingly difficult to service their debts. By mid-06, the jig was up. Home prices began to fall. Banks would not / could not extend refinancing. The value of mortgage backed securities plummeted. Companies that couldn’t possibly insure against such losses but did anyway went broke. The rest is (not yet) history. For Asia, the good news part of the story above is that regional debt loads remain far lower than they were in the US. It is not unreasonable to conclude that risks in Asia are lower accordingly. Debt burdens and interest rates Debt loads aren’t a big problem when interest rates are zero. (“Roll it over Joe, and call me next year.”) It’s when you can’t make the payments that trouble begins and what used to be a hidden bubble isn’t so hidden anymore. How burdensome are Asia’s housing payments today and who will be in trouble when today’s rockbottom rates start to go up? To answer the first question, we calculate the annual payment required to retire the stock of

“In Singapore and Hong Kong, Asia’s richest countries, housing loans have grown to about 45% of GDP.”

outstanding housing loans in each country, at the prevailing interest rate and subject to the condition that principal and interest are repaid in full over the next 20 years. Who’s got Asia’s biggest payments? By this gauge, it turns out to be Taiwan, where 2.9% of GDP goes to pay housing principal and interest. But Hong Kong and Singapore are almost identical, paying 2.8% and 2.7% of GDP to service housing debt each year. Malaysia’s and Korea’s burdens are in the low 2 percent range. Thailand’s burden is an even lower 1.8% of GDP. Where does China fall on this ladder? Near the bottom with annual housing payments of only 1.4% of GDP. Worry? It wouldn’t seem so. Especially when one compares Asia’s debt burdens with the US. There, payments are running at 5.4% of GDP, nearly 6x higher than in China, and 2x higher than in Hong Kong, Singapore and Taiwan. Again, this has to be good news for Asia. The US seems to have blown for a reason and, for the same reason, Asia seems unlikely to. Who’s vulnerable in Asia? When rates go up, RRisks remain. Interest rates have been on the floor for 5 years. What’s going to happen when they go back up? Who’s vulnerable in Asia? The simplest way to answer this question is to re-calculate the housing payments made above under the new assumption that interest rates have returned to their pre-crisis level. Who suffers most will depend partly on debt loads and partly on whose interest rates fell the most and will now rise the most. The key variables behind these calculations are shown in the table below. It comes as no surprise that interest rates in Singapore and Hong Kong have fallen comparatively the most in Asia - by a factor of 2x to 2.1x. Singapore and Hong Kong run currency pegs, which means their interest rates track US rates (in the case of HK). SINGAPORE BUSINESS REVIEW | JULY 2013 37

legal briefing

Singapore takes steps to protect itself from cyber attacks Some specified persons are authorised to take necessary counter attack measures.

ingapore has recently passed the Computer Misuse (Amendment) Bill in view of the rising threats of cyber attacks. Winnie Chang, partner at Colin Ng & Partners, said that the Computer Misuse Act which has been renamed the ‘Computer Misuse and Cybersecurity Act’ adopts measures that are broadly in line with those considered or implemented by countries such as the United States and Israel. In particular, the Amended Act empowers the Minister of House Affairs to authorise a person or organisation to take such measures as may be necessary to prevent or counter attacks that may threaten Singapore’s national security, essential services, defense, or foreign relations. Here are the highlights: How is the Minister empowered in the case of a cyber attack or a potential cyber attack? According to Chang, several powers were given to the Minister. First, the Minister can require the specified person to access both a computer reasonably suspected of being used in connection with an offence and decryption information for the purposes of investigating an offence. The specified person is also required to direct another person to disclose any information that is necessary to identify, detect, or counter a cyber

“Offence involving ‘consent’ or ‘connivance’ results in criminal penalties, while an offence involving ‘negligence’ results in the payment of civil penalty only.” threat, including details of the design, configuration, operation, and security of any computer or computer service. Any information, including real-time information obtained from their computer, that is necessary to identify, act, or counter any threat must also be provided by the specified person to the Minister. Finally, the specified person is required to report cyber security breaches/attempted breaches to the Minister or authorised public officer. “Generally, the Minister will seek only information that is of a technical nature, such as firewall rules, network design architecture, and software algorithms, in order to detect an attempted or ongoing cyber attack, address system vulnerabilities, and to prevent threats.” 38 SINGAPORE BUSINESS REVIEW | JULY 2013

Winnie Chang

Chia Ling Koh

Woon C. Yew

What constitutes ‘essential services’? According to Chang, the amended law expands the definition and scope of ‘essential services’ to include services directly related to land transport infrastructure, aviation, shipping, and health services. The term ‘essential services’, she added, is now defined as “services directly related to communications, infrastructure, banking and finance, public utilities, public transportation, land transport, infrastructure, aviation, shipping, or public key infrastructure, or emergency services such as police, civil defense, or health services.” What if the specified person failed to comply with the directions? According to Woon C. Yew, partner at Rodyk & Davidson, specified persons are expected to take the necessary measures and comply with the Minister’s orders at their own cost. Any person who, without reasonable excuse, fails to comply with the directions of a specified person, will also be guilty of an offence, she said. What is the penalty? ATMD Bird & Bird partner Chia Ling Koh clarified that the new law explicitly confers immunity from any civil or criminal liability that may be incurred while fulfilling an obligation under the new law. A specified person who fails to comply with the Minister’s directions without reasonable excuse will be guilty of an offence and be liable on conviction to a fine not exceeding S$50,000 or to imprisonment for a term not exceeding 10 years or to both. How would the changes affect companies? Yew cited the following as an example of the effect of the Amendment Act: When the Government receives intelligence of a planned cyber attack against Singapore’s banking system, the Minister can order telecommunications companies and banks (i.e. the “specified persons”) to provide information on their computer systems and networks and to take such measures as the Minister shall direct. If the information is not in the possession of the telecommunications companies or banks, they will have to direct their IT vendors to release the information. The telecommunications companies, banks, and their respective IT vendors are not excused from compliance on the basis that the information constitutes trade secrets, or that they are under a duty of confidentiality. If they do not comply, they will be guilty of an offence.

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CMO Briefing

the fare from $300 SGD to $188 SGD, and selling out the tickets. Scoot’s Commercial Director, Steven Greenway, adds: “We had a promotion for our Singapore-Taiwan-Korean-Japan routes. We utilized FB’s offer solution and backed this up with Facebook advertising helping the offer to go viral. The sale saw one of our largest booking days on record.” Zalora’s Purrer argues Facebook is indeed driving significant sales - directly and indirectly. “The key to this is to get engagement around the content we create and the products we offer, and not solely to rely on increasing the number of fans of our page - especially due to the way the Edgerank algorithm works,” he adds. Starhub’s Wang, meanwhile, says while virality is not a given for FB advertisements, the platform is still a fairly cost-effective way of getting a company’s message out to the relevant target audiences with a significant level of volume. According to Facebook’s Stotland, on average, 70% of ad campaigns on Facebook show a return on ad spend of 3x or better, and 49% of campaigns show a return on ad spend of 5x or better. “We have worked with some of the biggest global brands that include Samsung Mobile USA, Nissan Australia and Ocean Park Hong Kong, and we have seen great results generated out of their ad campaigns on Facebook.”

Trends in Facebook marketing Wang Li-Na, Head of Consumer Marketing at StarHub reckons it is important for brand owners to be present in Facebook to address the different views consumers have on their brands. Indeed, with more users accessing social media platforms from their mobile devices, more brands are actually engaging with customers on the platform to grow its business, says Doug Stotland, Director at Facebook. Ministry of Retail, a Singapore-based small online fashion store, is one case in point. Its marketing activities on Facebook has generated up to 50% of the sales with the ROI of its advertising spend over 300% on average. Zalora, another e-commerce sensation, also runs both paid and organic advertising on FB. Bastian Purrer, CMO at Zalora Southeast Asia says their presence on Facebook enhances referral marketing, whereby users recommend Zalora to their friends and loved ones. In a recent campaign, Scoot Airlines also used Facebook in a promo that aims to lower the fare to Seoul as the Likes, Comments, and Shares increase. The promo ended up with Scoot getting 10,000 new Facebook fans which now total 250,000, lowering

Success stories through Facebook According to Stotland, Scoot is one of the brands seeing great results on Facebook. The airlines created a campaign leveraging Japan’s vending machine culture to sell air tickets. It became one of Scoot’s most successful campaigns in ticket sales – for every dollar Scoot spent on the campaign, they gained $14 in return, says Stotland. Singapore e-commerce retailer, Qoo10, also achieved 94% increase in customer leads and 66% increase in sales conversions in just 6 months. Zalora managed to create significant buzz on social media for Zalora SG’s launch party last year, through contests and direct marketing which was brought from offline to online. The marketing team headed to clubbing destinations Mink and Zouk as well as Orchard Road to talk to party-goers and shoppers about the launch party, and to involve them in Facebook activity. “We saw an increase of participation on Facebook with a 47% increase in ‘likes’ & 53.6% in ‘talking about this’ (engagement) from the first day of “Party Roving” to the event day, while our Twitter followers also increased during the same period,” reveals Purrer. Interacting with customers is a given advantage for using Facebook, but more than that, the site helps companies to facilitate individual purchases, build trust and understand trends and demand. Though we do not have tools yet to accurately measure Facebook’s exact effectiveness and impact on sales, having millions of fans or likes has shown to have some value in it. Besides, which company wouldn’t want to be ‘liked’ by their customer?

Do Facebook ‘likes’ translate to sales?

Find out if Singapore companies’ Facebook presence actually makes or breaks their brand. ith Coca Cola recently admitting that having close to 62 million fans on Facebook does not drive direct sales and in fact only affects it by 0.01%, we set out to investigate if Singapore companies are actually benefitting from their Facebook presence. Eric Schmidt, senior manager-marketing strategy and insights at Coca-Cola, said in a conference, “We didn’t see any statistically significant relationship between our buzz and our short-term sales.” So the question is, do Facebook ‘likes’ translate to sales? Or is Facebook just an avenue for customers to vent out their complaints for all the world to see?

40 SINGAPORE BUSINESS REVIEW | JULY 2013

70% of ad campaigns on Facebook show a return on ad spend of 3x or better

co-published Corporate profile

Laboratory space at Eastman Asia Pacific Technical Center

Eastman unveils new tech centre in Singapore

This signals chemical firm Eastman’s commitment to its Asian clients.

astman, a Fortune 500 company, recently unveiled the tech centre which will improve its research capabilities in chemicals R&D across the region. Located in Singapore’s Alexandra Technopark it includes a 24/7 lab aimed at energy savings of 50%. Sustainability is a major part of Eastman’s philosophy both in its own operations and in the wide range solutions it offers its clients. The company operates across diverse product lines such as - architectural coatings, adhesives such as those used in diapers, and plastics. One of Eastman’s most well-known plastics is a highly durable material called Tritan, which is BPA-free. When Eastman first entered Asia back in 1997 it launch an early version of the tech center in Singapore. But over the years, as its Asian business has grown, Eastman felt the need to significantly upgrade these facilities. Dr Greg Nelson, Senior Vice President and Chief Technology Officer of Eastman Chemical Company, was in Singapore for the tech center launch.

highlighting how important the region is to the group. It predicts continued healthy growth as Asia’s middle classes grow and demand safer, better-designed and more sustainable products. Dr. Nelson added: “Growth in Asia is the fastest across the whole group which we could not achieve without being engaged with our customers. This happens because of having a modern tech centre where we can design and create the exact products our clients need. “You put your best research close to your best markets. For us that’s Asia.” Sustainability in Asia Eastman is a global market leader across a range of sectors including building and construction, consumables and energy. Interestingly, Asia has overtaken Europe in terms of demand for more sustainable and

Dr. Gregory W. Nelson SVP and CTO Eastman Chemical Company safer consumer products, according to Dr. Nelson. He said: “People in Asia care greatly about sustainability. They want to know the source of the materials that go into the products they are buying.” And Eastman, with its new tech center, is in the perfect position to collaborate with its Asian clients on new designs and solutions. It has plenty of exciting products in the pipeline to cater to such demands for greater sustainability. These include a cleaner diesel fuel and a high-speed wood coating technology. While the tech centre employs a permanent staff of 15, part of the redesign has created space to increase its headcount by 50%.

Asia is Eastman’s best market He said: “In 1997 when we first came to Singapore the world was a very different place. Asia has now become a huge driving force and has its own agenda. As an innovative company we must adapt to that.” From a standing start, Asia now accounts for 28% of the Eastman’s total revenues,

“People in Asia care greatly about sustainability. They want to know the source of the materials that go into the products they are buying.”

Laboratory worker at Eastman Asia Pacific Technical Center SINGAPORE BUSINESS REVIEW | JULY 2013 41

EUROPEAN COUNTRY REPORT

What you need to know about European companies that excel in Singapore

Singapore remains a business hub for multi-national companies and is home to regional headquarters of most global companies. Find out more about how IFS and SCCP Group succeeded in Singapore.

FS is a local Scandinavian company founded in 1983 by 5 engineers. After more than 3 decades in the business, IFS is now a leading global provider of ERP solutions with a presence in more than 60 countries and 2,800 employees worldwide. It is listed on the NASDAQ OMX Stockholm Stock Exchange, with a net revenue of SKr 2.7billion in 2012. As a global enterprise software vendor, IFS serves industries where asset management, manufacturing, field service management, supply chain management, or project management are core disciplines. Secret to success IFS’s secret weapon is its architecture and technology strategy. All other enterprise application software vendors, and their customers, now face the monumental challenge of migrating their mainstream

monolithic applications to SOA. This gives IFS customers the enviable advantages of superior agility and lower total cost of ownership. According to Jan Brunaes, IFS’ President for Asia Pacific, the company manages to succeed in all 60 countries by focusing on the development of one product line. “Our success is due to our deep industry knowledge and global and local partnerships. We get closer to our customers and are more agile to build what they really need into our business software,” he adds. He also reckons that customers love the simplicity and ‘walk-up-and-use’ navigation of IFS Applications and IFS’ mobile access to key data (both online or offline). IFS has invested heavily in making IFS Applications mobile to all users, whether it is for the business professional needing to access the CRM or approve work orders or do expenses from their mobile device to the heavy user such as a field engineer needing business applications out in the field for service or

“IFS’s secret weapon is its architecture and technology strategy.”

Jan Brunaes IFS’ President for Asia Pacific 42 SINGAPORE BUSINESS REVIEW | JULY 2013

Sridharan Arumugam, IFS’ Vice President for South East Asia

asset management,” adds Brunaes. IFS in Singapore IFS Solutions Asia Pacific in Singapore is the company’s headquarters for the Asia Pacific region. Sridharan Arumugam, IFS’ Vice President for South East Asia, notes that IFS Singapore has been providing sales, professional services and support to customers since late 1990s. IFS has a strong position in asset and project intensive sectors such as oil & gas, construction, ship-building, utilities and project-based manufacturing, which is an excellent platform for future growth. “We have strong and deep partnerships within these industries, namely NEC, Mahindra Satyam and Infosys. Each partner provides us with a broad variety of perspectives and attractive potential in our target markets,” says Arumugam. IFS’ extensive customer references in Singapore include SeaDrill, Technip, Serimax, Jotun, BW Offshore, Trelleborg Offshore Norway, Applikon Biotechnology, Pipeline Engineering and others. Arumugam reveals that with IFS’ core strengths in project-based industries, and the ability to manage projects inside its ERP system through tightly integrated project management, IFS Applications is a powerful

EUROPEAN COUNTRY REPORT

project-based ERP system designed for companies in Singapore and other ASEAN countries. From an ERP solutions provider, another company that makes its way to success in Singapore is SCCP Group, which has a committment to provide acquirers and merchants with a full business suite and secure m-Commerce solutions. Its flagship product suite Swiff offers Swiff Pay, Swiff mWallet, Swiff Certificate, Swiff Gateway, Swiff Processor and other stand alone products like Swiff Authentication and Swiff Enrollment, to make sure clients use solutions that can be deployed rapidly and cost-effectively. According to Jérôme Clé, SCCP Group’s CEO, what sets them apart from competitors is the ‘’interoperability of platform, device-agnostic technology and security of proprietary multi-factor authentication.” He adds that Swiff enables banks to expand merchant services and the card issuing and acceptance rate, therefore enhancing their business. At the same time, Swiff reduces fraud through a multi-factor authentication and encryption platform that in turn, boosts performance by minimizing risk. SCCP’s global clients SCCP currently has a global scope of big clients, including one of Thailand’s largest banks Bank of Aduyha, Krunsgri. Swiff MPoS platform has enabled Krunsgri to roll out their secure mobile strategy while ensuring the highest standards of service excellence their customers have come to expect. SCCP also recently linked up with Bank of the Philippine Islands for mobile payments solution. CEO Jérôme Clé says BPI is known for the ease of use with all of their products and the Swiff solution tailored for them delivers on the promise of easy, quick and secure transactions. “As an emerging market in Asia, the Philippines has many SMEs and independent businesses that previously could not accept credit cards. Mobile payment solutions like Swiff mPoS provide these businesses with ideal opportunities to expand their sales by accepting more forms of payment. As a result, we have enjoyed an enthusiastic reception in the Filipino market and business there is growing exponentially,” comments Jérôme Clé. In line with widening their horizons to the Middle-East, Russia and Europe, SCCP has just announced an expansion in North America last March. Jérôme Clé says that

Jérôme Clé, SCCP group CEO mPos solutions and security technology are all active in these markets. “We can continue to follow our international strategy of expansion in all of the Americas. SCCP also has a data center in the US and this has proven critical for our operations with our testing and authentication,” he concludes. Lastly, we have LAUFEN, a company established in 1892 and has since revolutionized sanitary ware manufacturing. Being the only sanitary ceramic manufacturer producing exclusively in Europe, the company has greatly raised the standards for sanitary products. LAUFEN stands out with its products’ Swiss design that unites emotional Italian design from southern Europe with the north European Germanic tradition of design, precision and clarity. LAUFEN’s promise of quality According to LAUFEN Senior Managing Director Alberto Magrans, design, cutting-edge technology, innovation and internationality are part of LAUFEN’s Swiss DNA. Therefore LAUFEN is constantly working together with internationally renowned architects on many projects and is inspired by the latest trends in architecture. “We are working very hard to support project planners and architects and have recently established teams for the main centers of architecture, like London, New York and, of course, Singapore,” adds Magrans. LAUFEN aims to achieve utmost

competence in technology, service, and design to be the leading bathroom brand within the project business and high-end residential market. Apart from a wide range of products and excellent service, LAUFEN redefines bathrooms from being mere sanitary venues to sophisticated ones by cooperating with great designers. Magrans notes that in the 1990s, LAUFEN brought its first fully equipped designer bathroom onto the market, designed by F. A. Porsche. “In 2002, we had sensational success with the bathroom concept “ILBAGNOALESSI One” which was developed with the famous Italian design creator Alessi,” reveals Magrans. The company introduced the Laufen Clean Coat (LCC), a high-tech material with unique surface properties developed with ceramic experts and German universities. “With LCC we have a dirt-repellent surface finish in our range that facilitates the cleaning of sanitary facilities and significantly improves hygiene. Particles of dirt, limescale, grease and bacteria have virtually no chance on this exceptionally smooth surface which saves both time and costs for the user,” says Magrans.

“SCCP currently has a global scope of big clients, including one of Thailand’s largest banks.” SINGAPORE BUSINESS REVIEW | JULY 2013 43

CHRO Briefing A large part still depends on the company and the individual.

Why parental leave is ‘too complicated’

Experts complain over paperworks involved with new leave types.

he road to amending the Marriage and Parenthood package was paved with good intentions but many CHROs doubt whether new additions could encourage a change of mindset for Singaporeans to have more babies. Bee Bee Tan, HR Manager of IndoChine Group, believes that the shared parental leave may not work as he thinks the criteria for availment are ‘too complicated’. “The father has to seek agreement from the mother in order to get a week leave from her 16-week maternity leave. Paper administration of this from a standpoint as an HR administrator is timeconsuming. I am a mother of two, personally I felt the 16 weeks maternity leave is not sufficient to care for a newborn baby. Ideally, a six-month period could be better but mothers now have to share her maternity leave.” Overwhelming paperwork Ms Tan also cautioned that with the introduction of various leave types, when staff members apply for these leaves of absence at the same time, the company will need to cope with the job allocation of responsibilities and this may be too overwhelming, not to mention the paperwork involved. “I cannot tell my employees since she is pregnant, the rest of you please do not get pregnant until she has given birth!” Alicia Chin, HR Manager at Nuance-Watson, believes likewise and said that the shared maternity leave is a challenge from an employer’s perspective as there are no clear guidelines as to how such benefit is to be carried out and verified. “My concern will be that of too much complexity in the administration aspect.” JVC Electronics Singapore Kim Seng Tan said that the effect will be more pronounced to SMEs. “Business may have to rewrite their policies but

44 SINGAPORE BUSINESS REVIEW | JULY 2013

The father has to seek agreement from the mother to get a week leave.

somehow I do feel it may affect more the SMEs rather than the MNCs. I believe most MNCs may have such parental leave scheme, it is just an add-on. SMEs, with fewer workers, may feel the pinch if any of their workers is on leave. The M&P package may be a good incentive scheme but somehow there is an indirect cost to the business. A great deal of admin work is required to claim the reimbursement. Forms have to be filled and HR has to keep track of such leave. More work hours are needed and I don’t think SMEs could afford that.” Non-monetary measures The government can introduce non-monetary measures to address falling birth rates, suggested Mohd Dzulqhilfly, Sime Darby Singapore’s general manager for HR/ “In my 30 years experience in managing HR in developed and developing countries, I have seen a range of measures taken by Governments to raise falling birth rates as countries become more affluent. Whilst these measures make it easier for working parents to bear and raise children, they seldom significantly improve the birth rates. In countries which have been successful in maintaining birth rates there are more than financial incentives.” Brenton Ong, HR Manager of Concorde Hotel Singapore, believes on rethinking government stand on foreign labour. Ong said that from an employer’s perspective, these enhancements in maternity, paternity, and childcare provisions would further intensify the pressure on the existing workforce resulting in disruption in operations, reduced productivity, increased turnover, and higher operating costs. He said given the current government stand on reducing foreign labour dependency, employers, are given little option but to restructure operations, redesign jobs, and implement technology in order to stay in business. The primary concern to employers, particularly the SMEs, are therefore related to timing and cost, he said. “As these measures are mandated immediately, employers do not have the luxury of time or budget to take appropriate actions. Ideally, the government should relax the tightening of foreign workers and freeze the foreign worker levy for a grace period of, say, three years to grant employers sufficient time to automate, innovate, or restructure their operations whilst the enhanced maternal and paternal provisions are in operation.” Meanwhile Pat Tian Koh, HR Vice President at TÜV SÜD PSB, believes that government policies can only do so much. A large part, he said, still depends on the company and the individual.

CO-PUBLISHED CORPORATE PROFILE

Habitat-Barclays push for better living conditions for Singapore’s elderly

Find out how the collaboration between Habitat for Humanity and Barclays is helping alleviate the poverty issues in Singapore.

abitat for Humanity International believes everyone in Asia Pacific deserves a place to call home, and turns such expectations into reality by transforming lives through the provision of safe, decent and affordable homes. For 35 years, Habitat for Humanity has been a catalyst for such transformations, often achieving great success by working with like-minded partners. Humble beginnings In 2008, Habitat for Humanity in Singapore initiated a creative way to get people involved in achieving this vision through the Bare Your Sole walk. Yong Teck-Meng, National Director for Habitat for Humanity in Singapore, recalls that they wanted to do something unique and different and so they came up with the concept of people walking barefoot to remember those who have no homes. The first walks were relatively small scale, with only 350 - 400 participants. That was until one of Barclays’ senior management staff, Mark Stafford, joined the walk and was impressed with the concept. Stafford then proposed a collaborative effort with Habitat for Humanity which was realized in 2010.

Participants bare their soles for charity

“Barclays’ participation brought the event into a quantum leap kind of situation,” says Yong. He reveals that being an international corporation with experts in communications, events, and branding, Barclays has helped to dramatically increase the number of participants from 700 to 3,000. In 2012, the event reached 5,000 participants. Now on its fifth year, Habitat for Humanity and Barclays held the 2.5/5km Bare Your Sole walk at Gardens by the Bay East, Tanjong Rhu, to help raise funds for Habitat for Humanity Singapore’s local home cleanup program, Project Homeworks. Barclays is Habitat for Humanity Singapore’s key partner. Yong notes that “it is in the bones of habitat to collaborate.” Project Homeworks Yong notes that Habitat for Humanity

“Singapore is the only country in the entire world without poverty housing, as declared by the United Nations in the year 2008.”

builds houses for the poor all over the world, except in a few locations like Singapore. “Singapore is the only country in the entire world without poverty housing, as declared by the United Nations in the year 2008. So there’s nothing to build here but our focus has always been about living conditions. We just believe that people made in the image and likeness of God shouldn’t be allowed to live like animals anywhere in the world,” he adds. Though there are no people living in tent houses, trailers, or slums in Singapore, Habitat for Humanity Singapore discovered there are a lot of elderly people living in flats that are not so hygienic because they are not insane enough to be in an asylum somewhere but they are not normal enough either to upkeep themselves. “Although the flats were physically well-constructed by the very efficient government, they live in terrible conditions. Some live in houses that are bug-infested, they have rotten food, and they can look terrible,” says Yong. Project Homeworks does different things to improve this including fumigation to kill bugs, changing furniture, general cleaning and whatever it takes to make sure the elderly pool live as decent human beings. So what exactly is the significance of walking barefoot for the poverty issue in Singapore? According to Yong, they believe walking 2.5 - 5km without shoes is an experience that is unique enough to prick Singaporeans’ conscience and make them think about the issues of poverty. Along the way, Habitat puts up posters and educational banners to tell people about poverty. “So while we are focused on Project Homeworks, we are happy if at the end of the day, people decide to do something for someone, whether or not it is with Habitat. And who knows, among the people who walk, if people would be inspired to think further, just a little bit more, how to make our world a better place,” he reckons. SINGAPORE BUSINESS REVIEW | JULY 2013 45

DINING

Bacchanalia dishes up sharing plates These restaurants in Singapore offer treats that will certainly make diners come back for more.

Bacchanalia, Singapore 23A Coleman Street 179806 From the famed Bachannalia Brunch Series, Bachannalia opens its very own venue making its mark as Singapore’s alternative gourmet hotspot. For those looking for a bit more than just a quick dinner and one that encourages interactivity as it focuses on sharing multiple plates and dishes. Keeping it simple, the dining menu is divided according to vegetable, seafood, meat and dessert, making ordering completely fuss free. With Executive Chef Ivan Brehm creating dishes that are infused with old western and eastern classics revisited as well as new creations that are influenced by the team’s experiences from around the world. Guest and resident DJs further amplify the ambience spinning genres of music to match the mood of the evening along with mixologists concocting original cocktails for the most discerning tipplers.

Laduree, Singapore

Burnt Ends, Singapore

Takashimaya Shopping Centre, #02-09 and Level 1

20 Teck Lim Road, Singapore, Singapore 088391

Singapore gets some French flair with Laduree’s opening at Takashimaya shopping Centre, Ngee Ann City in the city. Choose from 16 macaron flavours, including seasonal treats like the Marie Antoinette, a tea-flavoured macaron in blue. With outlets in Japan, South Korea, Hong Kong and now Singapore, visitors are promised an identical experience as they would have in Paris. With the tearoom opening later, as of now visitors can enjoy their range of macarons, chocolates, confectionaries and selection of home fragrances.

New in the ever changing neighborhood in Chinatown is Burnt Ends, an Australian/ European roast and grill specialist along Teck Lim Road. With a custom built brick and ceramic dual-cavity over, Chef David Pynt whips out originals that are refreshingly new to Singapore’s gourmet radar. Using Apple and Almond wood to light the kiln, expect dishes such as Tartar Sriracha and Toast, Hot Roasted Quail and Aioli as well as seafood options such as Razor Clams with XO sauce and fresh coriander. With a no reservations policy, and an 18 seater communal table around the kitchen , expect to wait before getting a bite of Burnt Ends.

Recommended by QUINTESSENTIALLY LIFESTYLE, the world’s leading luxury lifestyle group with a 24-hour global concierge service. Contact singaporebusiness@ quintessentially.com. 46 SINGAPORE BUSINESS REVIEW | JULY 2013

OPINION

SEE WEE HENG

5 facts new workers in Singapore must never forget

BY SEE WEE HENG Social Media & Digital Marketer

If you have been working in Singapore for a while, some of these information might not come as a surprise for you. But for those who are just joining the workforce after graduation or starting out work in Singapore as a foreign talent, these 5 interesting facts may offer you a glimpse of what to expect at your workplace! 1. Be Nice to your Secretaries & Support Staff! From its 8th Talent Shortage Survey, Manpower Singapore found that as the global talent shortage continues to intensify, 47% of employers in Singapore are experiencing difficulty finding staff with the right skills. This is particularly true for positions in Office support, Supervisors and Labourers as compared to Production Operations, Accounting & Finance and Engineers in 2012. So be nice to them or you will be in for a hard time getting a replacement! 2. Work-Life Balance Is Not Encouraged Although the Human Resource Department of many organisations openly embraces Work Life Balance or at worse Work Life Integration, the notion is unfortunately not believed by its management. In fact, three-quarter of Singapore employers believe it is important their employees work over the weekends or after office hours! According to a survey by JobsCentral, 58%

significantly greater unhappiness in multiple job aspects such as work demands, autonomy and most importantly lack of advancement opportunities. Not exactly asking you to butter up your boss for a good bonus but it is always good to establish good relationship especially with your direct superior in Singapore.

4. Avoid Paying Extra Income Tax Nobody likes to receiving notifications or reminders to file their income tax returns “46% of employers went to emphasize that but it’s a ritual that we need to perform in order not to land yourself into more they would contact their employees who serious non-compliance scenarios. Instead of whining and doing a sloppy job, why are on leave.” not take a closer look at IRAS tax reliefs and rebates and see if you are eligible. Do your maintained it is important their employees homework and you may be pleasantly surprised remain contactable, regardless of whether by the savings! they are on vacation. 46% of employers went to emphasize that they would contact their 5. Get Protected! employees who are on leave. Not hard to figure If you are drawing above S$4,500 monthly salary, out why we are the most unhappy nation in the give yourself a pat on the back because you have world. just made it to the top 20% income earners in the country! Incidentally S$4,500 is also the 3. Have Good Relationships With Your Boss threshold that covers 50% of all Professionals, The same survey also touched on how an Managers and Executives. employee’s relationship with his or her boss can Unknown to many PMEs and even significantly affect their work experience. While Singaporeans, NTUC has set up a PME Unit to the majority of Singapore’s work population look after their needs and interests, particularly (69.1%) say that they share a good working in the areas of protection, placement and relationship with their superiors, those who progression as PMEs are a growing segment of indicated a lack of satisfaction in their employerSingapore workforce. employee relationship (30.9%) experienced

How about working while on vacation?

LIFE & STYLE

Hottest spots for gents’ grooming These 5 grooming houses feature the best pampering products and styling concepts only for men. We Need A Hero, Singapore 57 Eng Hoon Street Singapore 160057 Making hero’s out of ordinary men, We Need A Hero is a one stop grooming exclusively for the men, dedicated to helping men power up in style from head to toe. With options from shaves, brow grooming and IPL Services, as well as carefully handpicked grooming and skincare products, We Need A Hero makes sure you have everything to look your best. Hound Of The Baskervilles, Singapore 24 Bali Lane Singapore 189860 Revisiting old traditions, Hounds of the Baskervilles is a barber shop as well as a tattoo shop. Preferred to be seen as a collective of craftsmen, it is one of Singapore’s first traditional Western barbershops with attention to detail, immaculately coiffed barbers in true blue dapper style, and vintage furniture dressing the place in style. Men can enjoy haircuts, hot towel shaves, full face grooming and a dose of endless banter with the stylists. The Gentlemen’s Lounge, Singapore

310 Orchard Road, Level 7, Singapore 238864 Tangs, known as the country leader for beauty retail recently opened their new ‘Gentlemen’s Lounge’. The Lounge is created especially for discerning men who desire their wellness and grooming fixes away from usual female centric spas and salons. Indulge in signature services such as foot reflexology, body massages, manicures and pedicures. For the timestrapped, choose from a host of quick fixes such as back-and-shoulder or head-and-face massages.

Truefitt & Hill, Singapore 9 Ann Siang Road Singapore 069960 Tucked into a pre historic shophouse on Ann Siang Hill is one of the world’s oldest barber shops, Truefitt & Hill. Recently opened in Singapore, the Brit brand will offer a range of luxurious grooming experiences for the discerning male. Expect haircuts, traditional shaves with hot towels and manicures along with complimentary shoe shining and shirt ironing service as well as a bar where customers can unwind.

48 SINGAPORE BUSINESS REVIEW | JULY 2013

Lab Series, Singapore B3-44, Ion Orchard, Singapore The retail concept for Estée Lauder’s men’s skincare brand Lab Series at ION Orchard reinforces the brand’s statement ‘High tech. High performance’. Using touchscreens and video displays conveniently placed near products giving you information to help you pick the right one. Also enjoy complimentary treatments such as indepth skin type analysis, skin and hair solution or indulge in their range of effective eye creams, daily facial scrubs and brightening serums. Recommended by QUINTESSENTIALLY, the world’s leading luxury lifestyle group with a 24-hour global concierge service. Contact qsingapore@quintessentially.com or +65 6511 1199

numbers

1 in 2 Singaporeans still crave grandma’s cooking

With an overwhelming variety of food to choose from everyday, you’ll be surprised at the number of people in Singapore--and all over the world--who still prefer to eat food that they have grown up with.

Foods from different regions and culture

* All respondents of 4,000

Source: Nielsen Global

Food products developed by famous chefs or celebrity chefs * All respondents of 4,000

For more information contact: Ipsos, Tim Hill (tim.hill@ipsos.com) and Nicolas Bijuk (Nicolas.Bijuk@ipsos.com); Nielsen, Ellen Cuijpers (Ellen.Cuijpers@nielsen.com) 50 SINGAPORE BUSINESS REVIEW | JULY 2013

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