UNICORN INTERNATIONAL PTE LTD (Business dealings with Amos Industries Pte Ltd)

Mr Ong Kian Min asked the Minister for Finance whether his Ministry has investigated the matter relating to Unicorn International Pte Ltd's business dealings with Amos Industries Pte Ltd, and whether he will provide an update on his Ministry's findings and conclusion.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, during the Committee of Supply on 8th March 2000, the Member related that SMEs would probably do well to form alliances and that Government-linked companies (GLCs) are their obvious alliance partners. However, he said that he had received negative feedback to this idea, and then gave an account of the personal experience of one of his grassroots leaders.

I quote:

"He came across a new product in Italy that was superior and would prove to be an advantage in bidding for a certain Government tender. Being a small-time businessman, he approached a GLC to jointly pursue this Italian contact. He thought he could trust the GLC without signing a binding joint venture contract or non-circumvention agreement. ... When he brought the Italian principals to Singapore, the GLC partner ferried them away, bought them an expensive dinner and proposed to deal directly. With the GLC's immaculate credentials, it is no surprise that the Italian company was convinced to deal with the GLC directly, and the small guy was excluded from the arrangements."

In short, according to Mr Ong Kian Min, the grassroots leader alleged that a GLC had acted dishonourably in excluding him from a business arrangement, which the grassroots leader had introduced to the GLC, and that the GLC had reneged on an agreement to jointly pursue the contact, by dealing directly with his Italian principal.

The GLC concerned is Unicorn International. The Italian principal referred to was FB Design, and the Government contract relates to a Mindef tender. The grassroots leader was Mr Ng Cheng Hwee of Amos Industries. Mr Ng subsequently told the Sunday Times on 19th March 2000 that the GLC "then proceeded to ask a sister company to try and displace Amos from its existing servicing contract with the government agency".

I have investigated the case and am satisfied that the allegations have no merit. Unicorn International acted correctly and honourably in its dealings with the local company, Amos Industries, and its Italian principal, FB Design.

The facts of the incident are as follows:

In June 1997, Mr Ng approached Unicorn on a possible collaboration to market to Mindef a product manufactured by FB Design. Mr Ng represented to Unicorn that Amos was the sole and exclusive agent in Singapore for FB Design. On this basis, Unicorn and Amos agreed that Unicorn would submit the tender to Mindef, while Amos would not. Mr Ng confirmed this in writing on 5th September 1997. FB Design also affirmed Mr Ng's fax that "Unicorn will be the prime contractor for the tender".

On 10th June 1998, FB Design stated in a letter to Unicorn, which was copied to Amos, that Amos was its agent in Singapore and was rewarded on a commission basis, and that Amos had not been given any contractual capabilities, ie, Amos did not have the right to enter into any contracts on behalf of FB Design. Once the tender requirements were clear, FB Design would offer the product directly to, and possibly sign a contract with Mindef, or Unicorn.

In addition, Mindef has confirmed that Amos was not a pre-qualified supplier and thus could not bid for the contract directly. Since Amos was not in a position to bid for the contract in the first place, there is no basis to claim that Amos decided not to enter into any joint venture agreement or non-circumvention agreement with Unicorn because it felt it could trust Unicorn.

At meetings conducted on 11th and 12th August 1998, Unicorn management met FB Design representatives in Singa pore. Mr Ng was present. It was agreed that:

(a) Unicorn would be the party which would submit the tender bid to Mindef;

(b) FB Design would submit a quote directly to Unicorn for the supply of the products required by Mindef. FB Design's quote would include Amos' contractual commission;

(c) In the event that Unicorn succeeded in the tender, FB Design would pay Amos its contractual commission; and

(d) Amos would provide Unicorn with the requisite services for Mindef's maintenance and service requirements during the one-year warranty period, the understanding being that Amos would give a reasonable quote for its service charges.

After the meeting on 11th August, the Unicorn and FB Design representatives proceeded for dinner. Mr Ng did not attend the dinner because FB Design brought along a guest known to Unicorn, but not to Mr Ng. This was the "expensive dinner" which Mr Ong Kian Min referred to. In reality, it cost only S$375.58 for six persons, or about $63 per head. A lunch the next day with the same FB Design representatives included Mr Ng.

It is therefore clear that all material discussions on the transaction took place in Amos' presence, with Amos' consent on the agreed terms. It was FB Design which chose to deal directly with Unicorn. At no point did Unicorn propose to deal directly with the Italians, or exclude Amos from the arrangements.

Thereafter, Unicorn sought Amos' quote for its maintenance and service charges for the one-year warranty period. Amos quoted an unrealistically large sum, compared to figures furnished by FB Design. When this was brought to Amos' attention, they insisted on maintaining their price. This threatened to make the bid uncompetitive. Unicorn was thus compelled to approach various parties to provide alternative quotes, of which only ST Marine reverted. Even ST Marine's price was not low enough. Unicorn therefore did not give the maintenance contract to either Amos or ST Marine.

Mindef awarded the tender in March 1999. Unicorn failed to secure the contract. Amos complained to Mindef the same month. Mindef investigated the matter and found the complaint to be without merit. Mindef replied to Amos as follows:

"Our investigations showed that Unicorn International had never requested FB Design for the agency right. We also learned that when your Company's agency agreement with FB expired in December 1998, FB did not appoint UI or any other party as their new agent."

Despite this reply, Mr Ng was not satisfied. Hence, after Mr Ong Kian Min raised the matter in Parliament, Mr Ng spoke to the press to voice his grievances.

Mr Speaker, Sir, the facts of the case show that the accusations against Unicorn International have no basis. I have laid out the details of the entire incident in Parliament today, because the Government takes allegations of misconduct or unfair practices by GLCs very seriously. We have made it clear, both to GLCs and to the public, that we expect GLCs to maintain the highest standards of corporate conduct. We will not tolerate any unethical or illegal behaviour by GLCs, and will act swiftly and firmly to deal with any wrong-doing. At the same time, we cannot allow the reputations of our GLCs to be smeared by unfounded allegations. The GLCs have painstakingly built up their businesses and reputations over the years. Any accusation against a GLC must either be refuted conclusively, or else be substantiated and the GLC put right.

I understand that after Mr Ong Kian Min spoke in Parliament on 8th March 2000, he had been in touch with Unicorn International, which had informed him of the facts of the case. Subsequently, Mr Ong told the Sunday Times on 19th March 2000 that the matter was "a misunderstanding". However, the matter could not be left there unresolved. The "misunderstanding" had to be properly and publicly cleared up. I therefore thank Mr Ong for asking the question in Parliament, and giving me the opportunity to put the facts on the public record.

Mr Ong Kian Min (Pasir Ris): Sir, I thank the Minister for his full investigation and comprehensive reply. I am satisfied that Unicorn International acted properly throughout this transaction. In raising this matter I had no intention of misleading anyone into thinking that our GLCs were adopting cut-throat business practices. If such impression was indeed created, I apologise.

I am happy to note the Minister's reassurance to this House that the Government expects all our GLCs to adhere to responsible business practices.

Mr J. B. Jeyaretnam (Non-Constituency Member): Having heard the Minister, may I ask whether the Minister does not think it right that perhaps it is time that a Board of Ethics be appointed to investigate any misconduct or malpractices of any sort in the business sector in Singapore?

Dr Richard Hu Tsu Tau: I have just explained that there was no misconduct in this case. I know what the Member means, that is, in general, there should be some sort of appeal board. But I think it is unnecessary because I do not believe the problem is a major one and I do not see any reason to create a so-called Ethics Board.

Mr Jeyaretnam: Does the Minister not agree that it will make for greater transparency if we had a Board of Ethics which investigated and reported it publicly?

Dr Richard Hu Tsu Tau: My speech this afternoon and the response are as transparent as he can hope to have. I do not see what else he wants to do.