Saturday July 4, 2009
Nothing as solid as land
INSIGHT DOWN SOUTH
By SEAH CHIANG NEE
Banking has now lost its shine. Emphasis appears to be shifting towards accumulating land-based assets.
THE average Singaporean, it was once said half in jest, can easily become the world’s best civil servant or bank employee for reasons that are not very complimentary.
He is serious at work, generally efficient, unbending about rules, and, of course, corruption-free – “too afraid”, someone cynically added.
It also implies that he lacks initiative and avoids making decisions on his own for fear of making mistakes. But scoff as you may, this passive, efficient nature has contributed significantly to the making of one of Asia’s top financial centres and a modern business hub.
As a result, the city is home to more than 7,000 multinational corporations, including most of the top-notch banks. Then the economic storm broke, darkening Singapore’s horizon.
Now more than their neighbours, recession-hit Singaporeans, who have been used to the good life, are increasingly fretting about their future.
The crisis has sharpened their sense of vulnerability concerning size and economic dependency on others, and the ability to maintain their prosperity.
“The golden age of growth may have passed,” commented Selena Ling, an economist with OCBC bank.
Concerned, Prime Minister Lee Hsien Loong recently set up a high-level group to map out new economic strategies for the future.
“The road ahead will be difficult. First, we have to see through this global economic storm,” Lee said. “Beyond that, we face a new world.”
This year the economy may shrink by 8%, while GDP per person is expected to drop to US$32,000 (RM113,000) from US$37,700 (RM133,000) from 2008.
The chief concern is the eclipse of global banking, one of Singapore’s main pillars of growth.
Historically, financial services have powered the city’s growth, providing high-paying jobs for an army of graduates here and abroad. Thousands have now dissipated in a reversal of fortunes.
Since my early school-days, I have been advised by almost everybody’s mother to take up a banking career. “That’s where the money is” I was reminded.
Banking has now lost its shine, casting doubts on Singapore’s future. The big question: how can the country make up for its decline.
The government appears to be disillusioned, at least for now, about the prospects of major banks.
It has divested substantial holdings in two big banks – Bank of America and Barclays – and taking steep losses after buying them only a few years ago as long-term investments. More could follow.
Emphasis appears to be shifting towards accumulating land-based assets. The sovereign wealth funds said they would invest more in Asia, particularly in raw materials, natural resources and commodities.
It is apparent that the leaders now consider it more prudent to invest in “wealth that is in the ground” as a balance to the volatile financial markets.
When Singapore was spinning into crisis, it was noted here that the larger neighbours that have abundant natural resources – and have managed them well – have survived much better.
Some never went into recession. The fact that they were less involved in international trade explains the bulk of the reason, but the other is the benefits derived from their natural wealth.
By these standards, Singapore, with so few of them, is almost at the bottom of the table – far behind Australia, Canada or Indonesia. The Saudis have a great deal.
When financials collapsed ad inflation soared, they turned to their natural asset, oil, and if the price drops, it could be kept in the ground.
For me – and many other resources-starved Singaporeans – it would be ideal if Singapore could convert more of reserves into land-based wealth,foreign sensitivities permitting.
Many a time have I heard people say they wish Singapore will be able to buy and develop a piece of unused land or island in a nearby country!
In fact, the lack of space and natural resources was a major reason why Singapore moved into high savings, Minister Mentor Lee Kuan Yew once explained.
A large reserve is needed to provide a buffer against any financial crisis – just like at present – and make up for the lack of land-based assets. And that, he added, had to be the case in Singapore – always.
This discussion reminds me of a related one years ago when engineers were flocking to join the booming banking industry because of higher pay.
The trend led top civil servant (now retired) Ngiam Tong Dow to worry about this lop-sided switch – and its implications for a modern city. This was a time when Singapore needed to produce more builders rather than bankers, Ngiam said.
Engineers were people who built the city and factories and office buildings, as well as engines, highways, ships and airports.
Bankers, on the other hand, merely shifted wealth around from one place to another and earning a profit for it, he added. They didn’t actually build things.
Since then, of course, the world has shifted. Mega-industries today need cross-border financing, moving large amount of funds quickly so that trade and commerce can flow.
But his basic point remains valid today – more so after excessive and complex banking helped create the current financial mess.
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