Singapore
Aggressive predator
Life gets tough which means it's time for this little red dot to push up its investments overseas; hits incredible S$164 billion. By Seah Chiang Nee
May 2, 2004

AN oil-gas venture in Iran, a 547-room hotel in Osaka, a taxi company in Beijing and disused coal mines in France (for export to China).

There are also port terminals in Aden, 7-11 shops in Bangkok, a power-switchgear firm in Brunei, and a curry-puff maker in South Africa.

These are some of the foreign businesses acquired by Singaporean firms in recent years. They are spread across a wide arc of nations and interests.

But in the larger scheme of things, these are small flies.

The mega purchases have come mostly from state-owned or controlled firms, like SingTel, DBS Bank, Singapore Airlines and Singapore Power, which have pumped billions of dollars into foreign assets.

This was in response to a strategy in the early 90s to start a "foreign" economy by using its US$100bil reserves to take up stakes in Asia's booming economies.

The initial steps were establishing huge industrial cities in China, Indonesia, India and Vietnam that were built and managed, in part or in full, by Singaporeans.

The most active pursuits have taken place in the last 10 years.

Singapore has bought into banks, utilities, telecommunications, ports and properties. From a paltry S$22bil in 1992, Singapore's foreign investments have now topped S$164bil.

This strategy has not only changed the face of Singapore's economy but also created an impact in the region.
More than half are state investments by Temasek, the government's investment arm, with the rest coming from the private sector, especially the small individual businessmen.
Shortly after Cambodia shook off its "Killing Fields" instability, I met a Singaporean who told me he had started to ship consumer goods to Phnom Penh.
"Can they pay you?" I asked.
"Not with foreign exchange. They don't have it," he replied almost cheerily, but quickly added that he had a better deal. "I get paid in fish and prawn products. Very popular here."
He was also flying regularly to the Gulf states to buy cheap scrap metal ("virtually free," he quipped) and sell it in Singapore, Brunei and Malaysia.

Singapore's foreign adventure was less a choice than a means for survival.

With no hinterland, no natural resources or a large domestic market, but a lot of cash, Singapore had only one place to go - outside.

The region, if not the world, is its hinterland. In good times or bad, that's where it has to do business.

So while many countries were pulling back on their overseas investments in the face of a downturn, a SARS threat, or an upsurge in terrorism, Singapore carried on acquiring.
Some of its recent mega-deals include:

* SingPower acquiring energy firm TXU Australia for A$5.1bil (S$6.3bil).
* Temasek-linked ST Telemedia paying US$250mil for a 61.5% stake in Global Crossing, the Nasdaq-listed submarine cable operator.
* United Overseas Bank plans to acquire a 80.77% stake in Thailand's Bank of Asia for US$540mil (S$1.2bil) and doing due diligence for a 23% stake in PT Bank Buana Indonesia.
* International consortium including the Singapore government paying S$813mil for Mayne Group's 53 hospitals in Australia.

Temasek Holdings itself was in an acquisitive mood, scooping up a 5% stake in Telekom Malaysia for RM$1.6bil, a cell-phone business in Indonesia, and led a consortia to buy control of Indonesia's Bank Danamon and Bank Indonesia Internationao (BII).

It is planning to invest in Malaysia's 9th largest bank, Alliance, and South Korean leader Kookmin Bank.

"Like what the Dutch and the Swiss were able to do in America in an earlier era, we will be able to leave future generations of Singaporeans a sizeable external portfolio," said the Minister of Trade and Industry George Yeo.

Of the S$164bil invested overseas, China is the largest recipient, taking in 16%, followed by Malaysia, Hong Kong, USA and Indonesia.

(More than half is state investment, the rest private sector. Based on a population of 3.4 citizens, it would work out to some S$242,000 for every man, woman and child.)

Emerging India is being targeted for increased investment; another is "old friend" Malaysia.
As a result of improved relations, Singapore officials and analysts now expect a retargeting of Malaysia under its global scheme.

A senior official of International Enterprise Singapore (formerly Singapore Trade Development Board), Ted Tan, said at a seminar that seven priority sectors had been identified: food, lifestyle, educational services, automotive, electronics and precision engineering, information-communication technology, and transport and logistics.

Expensive Singapore took this road when foreign investors began closing their factories here and moving them to lower-cost countries like China, India and Malaysia.

Apart from shifting to a high-tech economy, the republic began to look abroad for growth because home was too small.

Today, there is a greater sense of urgency in the wake of global changes, arrival of free trade pacts and job outsourcing.

In a weak employment market here, more graduates may have the chance of working in Singapore's business abroad.

Giants like SIA, Changi Airport and Port of Singapore Authority (PSA) are facing the severest competitive threat. (Budget airlines and long-haul flights may reduce stopover in Singapore.)

Hence, they have been among the most aggressive predators in the overseas takeover game, which is likely to intensify in the years ahead.

Some 20 large Singapore companies are expected to derive more than half of their profits overseas.

PSA Corporation, the second largest port operator in the world after Hong Kong Hutchison Port Holdings, which faces competition from Malaysian ports, has cut cost and reduced charges for customers.

But it has also been investing in Belgium and China profitably.

It plans to expand by building a port in Incheon, South Korea, and recently completed construction of another in Sines, Portugal. Both will start to contribute volumes this year.
Singapore's acquisition ambition is seen in a constitutional amendment last week to allow the transfer of national reserves to statutory boards or government companies "under circumstances not deemed as touching the reserves".

One reason was: It will provide capital for these institutions to benefit from commercial opportunities that might arise.

The Monetary Authority of Singapore, which acts as central bank, recently allowed the Sing dollar to float upwards to keep down inflation.

It will also make foreign acquisitions cheaper.

(Slightly updated of article first published in The Sunday Star, Malaysia.)