Trend - Economy

Sell Us A Little Bit - Cheaper
Many Singaporeans are hanging on to Telecom shares they got in 1993 at discount. By May they can add to them more national assets when part of PSA is sold. The question? Will it see a resumption of distribution of wealth promised eight years ago?
Updated Mar 13, 2001

Disappointingly, the government seems to have changed its mind about the way national assets were to be distributed to Singaporeans announced in 1993 when Telecom was privatised. If I am wrong, I¹d be happy to retract the comment.

Trouble is there has been no more talk about it.

In July last year, SMRT became the world¹s first urban rail operator to launch an initial public offering (IPO) in which the Singapore government sold about 33 per cent.

I was disappointed that there was no discount offerings to boost public ownership the way Telecom was done. It¹s not too late, though. The government still holds 67 per cent. It can divest more with the small investors in mind.

By May, another premium asset, PSA (Port of Singapore Authority) would have its IPO.

Not far away will be MediaCorp, our TV and radio stations and half a dozen other state companies in the next few years, including Singapore Power, Singapore Post, Changi Airport, and so on

Telecom was sold in separate tranches that allowed CPF investors to buy a small amount of shares at cheaper prices, remember? Today the need for discounted shares and more CPF top-up are even greater.

Besides, the earnings gap has widen between the higher-income and the poorer class. The move will tip a little balance in favour of Singaporeans over foreigners working here.

The Telecom way was, on hindsight, a brilliant move. It combined both - a CPF cash injection and the use of CPF money to buy a blue chip share at (as it turned out) a 23 per cent discount to what big investors tendered and paid for.

The objectives in 1993 was firstly, to promote long-term investment by Singaporeans in good shares. Secondly, the government wanted to distribute some of these national assets among the people - not free-of-charge, but at good discounts.

One Telecom tranche, in fact, comprised of loyalty shares that enabled long-term holders to get bonus shares over a longer period.

As of now, the Government holds close to $50 billion worth of stock, more than a quarter of the Singapore equity market, in everything from wafer fabs to shipping lines to banks.

In these days of global investment and the big bang, almost every business held by the government will eventually be on the sales block, including ­ my goodness - the illegal parking enforcement unit.

More and more such companies will be sold off because too much of it in government hand is not good for their investment forays abroad.

For the government, privatisation means getting the best price for the shares. As guardian of Singapore¹s collective fortune, that is its job.

The sale is done either by - or a combination of - private placements, public tenders or simply setting a maximum price it thinks the investors can bear.

But as in the Telecom sale, it has another duty, to distribute assets at a reduced price. A total of 1.1 billion Telecom shares (7.3% of the total) were sold in three tranches.

• Group A. Every Singaporean was entitled to 600 "loyalty" shares at $1.90 each, through CPF. To encourage long-term investment, every 100 shares would be entitled to 40 shares to be given over a period of six years. In fact, the government even topped up accounts to allow members to buy.
  

• Group B. Every Singaporean could apply for maximum of 1,000 shares at $2 each by cash or through CPF but subject to balloting.
  

• Group C. Open bidding, starting at #2 each. No limit. Anyone could apply. (Eventually the cut-off point was $2.60).
  

Small investors could make an immediate profit which will go to their CPF savings. Since the loyalty shares would multiply, the vast majority will probably keep them.

The wealth distribution followed one of the world¹s most successful exercises of asset accumulation here done over 30 years.

Refurbishing of public housing was a big way of doing it; now private estates are benefiting, too. Privatisation was another. The aim was to enable Singaporeans to benefit directly from the country¹s prosperity, Prime Minister Goh Chok Tong then announced in Parliament.

"The reserves that we built", he added, to the cheers of many Singaporeans "belong to all Singaporeans, not to a few people in the government."

That was, of course, a time when reserves were rising rapidly and so were budget surpluses. But the less well off were complaining that "the country was getting richer, but the people, poorer".

Surely, if Singapore were a company, after 30 years of strong profits, it must pay out good dividends to its shareholders?

Today, wealth re-channeling is needed more than in 1993. With general elections due in 2002, it will not do the ruling party any harm either.

Singapore¹s lower middle class, especially those above 40 years old and the heartlanders are increasingly suffering from the switch to a high-tech society. Even if they go for skill retraining, many will still fall behind.

Another compelling reason is the poor cash savings of many CPF members. More than half of them don¹t have enough for retirement. Even with all the revamp, it is too late for the elderly who are retiring in the next few years.

Allowing Singaporeans to buy new GLCs (even if its only a few hundred shares) at special prices may not be much to high-earning professionals, but for the 40-plus lower class, it will go a long way.

Better still, if loyalty shares are given, with their multiplying effect.

One difficulty is that few of the forthcoming sales will be as large as Telecom, which means only a smaller number of shares will be sold. That doesn¹t matter.

Even if the discounted offer is for fewer shares ­ say 50 or 100 shares ­ the potential benefits will add up if it is made up into a standing policy and the discount is bigger. Besides, more future bonus shares over a longer period of time.

If the concept was a good one in 1993, it can¹t be a bad one today. Nothing has happened that has changed the argument.

The government has enough good bureaucrats to work out even more rewarding systems for Singaporeans.

Seah Chiang Nee

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