NEW CHARTER OF GOVERNMENT-LINKED COMPANIES

Debate resumed.

Mr Speaker: Mr Leong, you can proceed with your speech.

Mr Leong Horn Kee: Sir, with your permission, may I ask the Clerk to circulate a table prepared by DOS on this study. [Table circulated to hon. Members.]

Sir, this table shows the share of GDP in 1998. Let us take a look at this table. What I found significant is that, of the 100% share, the Public Sector, which is Government, in terms of providing schools, defence and various Government regulatory functions and services accounted for 8.9%. Of the remaining 87.5%, which is under the Corporate Sector, 41.5% was taken up by foreign-owned companies, with 46% by locally-controlled companies. And of this 46% locally-controlled companies, 12.9% were owned by GLCs and 33.1% owned by "others" which is, I presume, the private sector companies. What is shown here is that the total pie of the locally-controlled companies of 46%, one third was already owned by GLCs, leaving only two-thirds for the private sector. This percentage is indeed significant.

If we look further into this table, add the 8.9% for public sector to the 12.9% of GLCs, we get a total of 21.8%. Compare 21.8% to the 33.1% which is owned by private sector, the comparison is about 40:60, which means Government in commercial business as well as Government in government business accounts for 40% versus 60% for local companies.

Therefore, this is clear evidence that the public sector and the GLCs combined have invaded into 40% of our daily life, compared to the private firms, if we take away the portion owned by MNCs and the foreign-owned companies. No wonder the presence of the Government and GLCs is felt so strongly in Singapore. Many may feel very stifling, others may develop a dependency syndrome.

It is assessed that the GLCs accounted for 12.9% of the GDP in 1998. However, now in year 2002, four years later, I expect the figure to be higher if we include a few large Government agencies that have been corporatised such as the PSA Corporation and PWD Corporation (renamed as the CPG group, I think). Then, if we include a few new subsidiaries of PSB, JTC and other Government agencies and statutory boards and several existing GLCs and NLCs that have expanded, the GLCs' share of the GDP will be larger. The Temasek Holdings' press release stated that seven listed GLCs account for 21% of the total market capitalisation of the Stock Exchange today. They have a total value of S$72 billion. This growth of the GLCs could have been at the expense of the private companies.

Sir, at one-third share of the local business pie, the GLCs definitely are a very visible and pervasive group. Once I read an annual report of Temasek Holdings. What struck me most was that it was like reading the Economic Survey of Singapore. GLCs were in banking, shipping, electronics, semi-conductors, transport and logistics, food, property, hotels, retail, media and so on. Practically you name it, they are in it. I have said before in this House that if you throw a stone, you will very likely hit a GLC.

Transparency and Trust

To a lesser extent, the third refrain against GLCs is that some of them operate under a special cloak of secrecy or different rules because they are Government-owned to serve special national, defence or security purposes.

This is the manner whereby the Singapore Technologies group first started. They were formed to undertake production and services for defence and ordnance requirements of Mindef. The public's perception is that these companies operated under strict confidentiality for defence and security reasons. In the early years, many were awarded Government contracts because of their special nature. Over time, they grew and grew, and finally became sizeable businesses. But for the purpose of growth and survival, these GLCs ventured into businesses that could well be undertaken by the private sector. The concern is that some GLCs, especially those which are not listed, operated under rules that may not be too transparent. There are perceptions, misconstrued perhaps, that they may be favoured for Government contracts.

On the issue of trust, I recall that when I was a junior Administrative Officer in the Ministry of Finance in the mid-70s, my senior used to tell me that we cannot trust the local businessmen. Anything they asked for is for their own benefit. Therefore, we must say no to them three times. Only if they come back after the third no, then they may truly have a grievance and needed help. Of course, things have changed. The mistrust now may not be as pronounced. Nevertheless, it is good that Government can work hand in glove with the private sector to develop more mutual trust.

On the other hand, some SMEs fear and mistrust the GLCs. They are afraid that GLCs could steal their ideas or swallow them up if they get too close to them. Therefore, there is a need to foster closer and better mutual trust between GLCs and private companies. This may be achieved by greater transparency. One method, if I could suggest, is for Temasek and the Government to publish an annual report.

Comparison of Singapore and Hong Kong

It was explained that the genesis of GLCs in the early years was to spur economic development. GLCs were formed to enter areas which the private sector was unable to do because of size, finance, risk or know-how.

For contrast, Hong Kong operated differently from Singapore because of our different history. In each's own way, both Singapore and Hong Kong have found their own path to economic success in the last 50 years. They have no major GLCs in Hong Kong (at least not as many as in Singapore). Business is managed on a more laissez-faire manner. Currently, Singapore has a population of 4.1 million, whereas Hong Kong has a population of 6.8 million, that is, 66% more. Singapore's GDP in year 2001 was US$92 billion, whereas Hong Kong's GDP was US$163 billion, which is 77% higher. Hence, in a very simplistic contrast between Hong Kong and Singapore, it seems that Hong Kong's model without GLCs is marginally more productive and efficient than Singapore. However, the bigger contrast is that Hong Kong has a larger pool of successful entrepreneurs and business people. In the list of billionaires in Asia, Hong Kong has a total of 11 names whereas Singapore has only five names. Hong Kong has a long list of successful industrialists in diversified businesses, such as Li Ka-Shing, Michael Kadoorie, Patrick Wang, Peter Woo and others.

Hypothetically, if the Government did not create GLCs in the early years in Singapore, I believe we would have a stronger and deeper spread of private entrepreneurs and businessmen now. In the early pioneer days, we had notable successful businessmen like Lee Kong Chian, Tan Lark Sye, Aw Boon Haw, Loke Wan Tho and Runme Shaw.

However, I lament to note that there is a paucity of successful private sector entrepreneurs who could rise to prominence in the 70s, 80s and 90s. I call this the vacuum period. The most notable businessmen in current days are Lien Ying Chow and Wee Cho Yaw in the banking sector and Kwek Hong Png, Khoo Teck Puat and Ng Teng Fong in the property sector. There are no industrialists of eminence in Singapore. The only person constantly quoted is Sim Wong Hoo of Creative Technology.

Reason for Dearth of Entrepreneurs

I would attribute the dearth of entrepreneurs during the last 30 years to two reasons. One is the rise of GLCs in the 1960s till to-date. The second is the monopoly of the public service over the top brains arising from the successful Government scholarship programme. The top brains are given prestigious scholarships. Upon their return from overseas, they are channelled into public service and the SAF. Many are later released to run GLCs. Without scholarships and left to their own devices, I would contend that some of our Ministers, top civil servants and generals could have become successful entrepreneurs, businessmen and professionals.

I can imagine that, if not for taking up scholarship and recruited into Government, for example, from the Ministerial rank, we could have a top IT business leader, a Singapore equivalent of Bill Gates in the person of DPM Lee Hsien Loong; a successful banker in the person of RAdm Teo Chee Hean; a successful MNC top executive in Mr Wong Kan Seng; and a prominent industrialist in BG George Yeo or Mr Lim Hng Kiang and many others. If we conjecture further, perhaps our Prime Minister himself, Mr Goh, could have become a top shipping magnate. Senior Minister, Mr Lee himself, no doubt would have been a top-notch lawyer in private practice. We never know. And we can muse about it. What if all these Ministers had not taken up scholarships and not gone into Government service? Perhaps, we would have more world-class local companies led by capable world-class entrepreneurs.

EISC Report

Mr Speaker, Sir, I shall now move on to make some specific comments on the EISC Report and the new Temasek Charter. I am in the fortunate position of not being involved in the preparation of these documents. I can be more critical. Unfortunately, my other parliamentary colleagues, Mr Inderjit Singh and Mrs Lim Hwee Hua, who are speaking after me, do not have such liberty, as they would have a hand in the preparation of these reports.

As regards the EISC report, I must first say that it is a very well-prepared and meaningful report. May I commend Mr Raymond Lim and his Committee for the excellent work. It points correctly to the future directions of Government in business and the new roles of GLCs. Unfortunately, I have to say that the EISC report has not gone far and bold enough. The suggestion on urging the Government not to enter into any more new businesses if they appear in the Yellow Book, is well-meaning, but too late. The Government and the NTUC are already in most businesses in the Yellow Book. What is there left that they should not get into in the future, may I ask?

As for its recommendations, I agree with all of them. In fact, I think the EISC should ask for more. For a start, I feel that the EISC should have explicitly asked for a curb on the proliferation of GLCs. How about the issue of crowding out and urging the Government to make more room and playing space for private sector? How about urging the Government to divest out of its non-strategic companies as soon as possible? Why not suggest a timeframe for divestment? I would prefer that the EISC recommendations be more specific and forceful.

New Temasek Charter for TLCs

Mr Speaker, Sir, my unhappiness with the new Temasek Charter is that it did not adequately address the basic issue, which is when and how should Temasek divest its TLCs. The press release contained many motherhood statements in its preamble on the Temasek Charter and new Mission. Instead of a clear divestment plan, it looks more like a Business Plan.

Though this Temasek Charter is prepared in response to the EISC Report, I feel that there is not enough connect between the two documents. Whilst EISC recommends that Temasek Holdings should explore various ways of divestment, the Temasek Charter sets out to be an updated raison d'etre for TLCs, which is to champion the march overseas. Temasek Holdings has recruited a very capable person, Mdm Ho Ching, to be Executive Director to oversee the group. Instead of slowly divesting off the companies, we now see a new Charter that defines the expanded role of TLCs. Read from the private sector perspective, Mdm Ho Ching is a powerful and influential new figure to help mould and transform the stronger and larger TLCs to become substantial players in the international arena. Some may have secretly harboured the hope that Mdm Ho Ching would have worked herself out of a job, with the gradual divesting off of GLCs. Alas, she is putting her capable hands and talented mind to grow TLCs instead.

I wish to express my worry over one particular statement in the Temasek Charter. In its last paragraph, it states:

"Temasek may also, from time to time, invest in new business, in order to nurture new industry clusters in Singapore." Many local businessmen are concerned with this statement. This signals that TLCs may enter new business opportunities in Singapore in competition against them. Their old worries about the unlevel playing field, formidable financial might, strong network and influence of top officers of TLCs will surface again. Now, with Mdm Ho leading the charge, they are afraid that they could be eaten for lunch.

Private Sector to be the future Engine for Growth

Ask any businessman, bliss to him is a business world in Singapore without GLCs. If there were no GLCs, they would have less competition, and more room to build up their businesses. I urge the Government to be serious on redefining the new roles of GLCs and government in business. Does the Government need to be involved in so many types and number of businesses? This question should be asked of NTUC and statutory boards as well.

Even internationally renowned consultants and thinkers agree on the need to review the role of GLCs in the remaking of Singapore.

Speaking at a seminar in Singapore on 25th July this year, Professor John Doggett of the University of Texas pointed out that with the rapid economic changes facing the world, countries have to become more entrepreneurial if growth is to continue. He thought that it is urgent that Singapore starts moving towards being an entrepreneurial nation now, as other countries in the region are already powering ahead. In addition, he also mentioned:

"If Singapore doesn't start producing more entrepreneurs soon, it will still be able to live an okay life for a while, but it will lose a lot of its vibrancy and its economy will be a flat line .. It will be a big challenge to remake Singapore in three to five years, or it will become irrelevant."

The Prime Minister has mentioned this point during the previous Sunday's National Day Rally speech. He said that we have to nurture a more enterprising environment. He said, tongue in cheek, that we should perhaps allow "bar top dancing". Well, I say if "bar top dancing" can squeeze out creative juices from our normally straitlaced Singaporeans, I am all for it.

Sir, at a Singapore Institute of Management seminar on 30th July this year, a renowned Harvard Business School don, Professor Michael Porter, said that thanks to the Government's strong support and a strategy of economic development driven by foreign investments, Singapore has attained an extraordinary level of prosperity today. But as the country seeks to remake the economy, the challenge is to jump to the innovation-driven advanced economy stage. The private sector needs to spread its wings and develop itself to take a leading role in the Singapore economy. I repeat, Professor Porter said, "The private sector has to take a leading role in the Singapore economy."

Moreover, Professor Michael Porter felt that the Government must now move on to reduce its role in the economy in the next stage of development and grow more local world-class companies. He said, "We have to get the Government out of the way; it is moving but the pace is too slow."

The common call is for Singapore to foster a stronger and larger pool of local businessmen to take on the likes of Li Ka Shing of Hong Kong; and nearer home, compete against the likes of Quek Leng Chan, Ananda Krishnan and Francis Yeoh of Malaysia.

Mr Speaker, Sir, having said the above, I wish to bring this House back to the Motion of this debate. The wordings are crafted to reflect the concerns of the private sector. As elaborated earlier, the concerns are with regard to unlevel playing field, crowding out and transparency. The Motion goes on to urge the Government to implement the recommendations of the EISC, which define the new roles and positioning of the Government and GLCs in business. In so doing, it therefore supports the growth of private enterprise and entrepreneurship in Singapore. The final operative words in the Motion are therefore - supports the growth of private enterprise and entrepreneurship in Singapore.

During our GPC's dialogue sessions with the Resource Panel members and industry representatives, the consensus was that it is acknowledged that GLCs have made great contributions in the past. Looking ahead, the Government should critically review the roles of the GLCs. As shown in the Department of Statistics study, GLCs already own one-third of the total GDP contribution of locally-controlled companies in 1998. Surely this cannot go on. There must be a point in time when the Government must stop encroaching into the private sector. GLCs should scale down and give more room for private enterprise.

However, I can concede that some GLCs are here to stay. They have become an integral part of the Singapore business landscape. The question now is how to define their future roles, so that they can continue to play an effective part in Singapore's prosperity. Since certain GLCs are of such a large size and scale, they obviously can play pivotal roles in venturing overseas together with other Singapore companies. This is the new Temasek Charter. But as for lesser GLCs involved in businesses which can be undertaken by the private sector, I strongly urge the Government to divest them.

Mr Speaker, Sir, may I move on to 10 recommendations that I have on how to shape the future roles of GLCs.

1. To curb the proliferation of GLCs

I suggest that the Government should make a bold and outright decision that henceforth, no new GLC should be formed unless it is for strategic or security reasons. No new GLC should be formed without the explicit consent of the Ministry of Finance. And the Government should not venture into commercial businesses where local businessmen can undertake. This applies even if such business ventures are not yet available in Singapore. To spur the establishment of such new businesses, the Government, through an existing GLC, can only take a minority role and a minority stake. There should be a stated objective that once the new project is on-track, the Government will sell its minority share to other interested buyers.

As suggested earlier, the Ministry of Finance and Temasek Holdings should publish Annual Reports for the purpose of more transparency.

2. Government to set a specific timeframe for divestment

For the companies that Temasek Holdings has deemed to be non-strategic, I urge the Government to set a definitive timeframe for divestment. This divestment plan should be reviewed yearly and reported by Temasek to the Ministry of Finance. In addition, during the yearly review, Temasek should also review those GLCs which are classified as strategic. Times may have changed such that these strategic companies may no longer be necessary to be held by the Government. As internal reviews by its staff may be inward looking and biased towards self-preservation, an external consultant or review group could be appointed to study and make recommendations.

3. Government to outsource any commercial requirements

Henceforth, the Government should set a clear policy that it would outsource any work or projects that the private sector can undertake. There has been a tendency in the past for Ministries, Government agencies and statutory boards to form subsidiaries to undertake work which could be easily performed by the private sector. This is introducing competition and obviously crowding out of the limited business space. If we look around, there are many examples. I wish to quote one example, Sir.

For 39 years, the Singapore Confederation of Industries (SCI) used to be the most prominent publisher of trade directories. Tradelink is their flagship publication. About 10 years ago, IE Singapore (formerly TDB) put out a competing product to Tradelink called Singapore Exporter. Because of IE Singapore's reach and capability, the Singapore Exporter has grown faster. Today, IE Singapore's publication unit has expanded to 50 staff issuing 12 publications. This is not to say that IE Singapore has done anything wrong. In fact, it has provided excellent services. The point is that SCI felt that IE Singapore could have cooperated with SCI, instead of competing against it.

4. Review of subsidiaries under the statutory boards and Government agencies

Besides the TLCs under Temasek, I note that there are several statutory boards and Government agencies which have formed many subsidiaries and joint ventures. Similar to the review by Temasek, I suggest that the Ministry of Finance do a comprehensive review of all such companies and joint ventures with a view to assess whether these GLCs should continue. All non-strategic companies should be earmarked for divestment. Thereafter, any new formation of companies and joint ventures by statutory boards should seek the consent of the Ministry of Finance. I strongly urge that there should be a curb on the proliferation of GLC formation, not just by Ministries, but by the statutory boards, Government agencies and existing GLCs as well.

5. NTUC/SLF to Review its Stable of Companies

Mr Speaker, Sir, although NTUC-linked companies (NLCs) are technically not defined as GLCs, as I said earlier, the public views NTUC-linked companies in the same vein as GLCs. I would urge that a review should also be done on the need to continue to divest NLCs; and the same rule to avoid proliferation should be applicable.

I can appreciate that the NLCs are formed with different objectives from GLCs. NLCs are formed with the social objectives to help union members, to help curb profiteering and keep prices low, or to provide recreational outlets for workers at low cost. These are very noble and laudable aims. I would suggest that for NLCs that have achieved a strong market presence to perform these social objectives effectively, such as the NTUC Fairprice, NTUC Income and the Pasir Ris Resort, it is worthwhile to retain such NLCs.

However, there are some NLCs that are smaller and have limited market impact to curb prices or lower costs. I would urge the NTUC and SLF to do a critical review on whether to keep them. Some examples I can quote are the NTUC Denticare and NTUC Foodfare. I must confess that I do not know enough about these smaller NLCs, but I would suggest that nevertheless a comprehensive review of NLCs should be done.

To service its union members, the NTUC can consider out-sourcing their needs. The NTUC could use its enormous experience in collective bargaining and the pooling of its demand from the huge number of union members to negotiate for lower prices from private sector operators. If the NTUC takes the route of creating NLCs, then they are competing instead of offering business to the private sector.

6. Give Priority to enacting a Competition Law

Sir, I strongly support the recommendation of the EISC to enact a Competition Law. This law will help to set the ground rules on competition between all companies, ie, the GLCs, TLCs, NLCs, MNCs and private companies. It will ensure that the playing field is expressly level. It will also have the benefit of ensuring transparency of operations of all companies operating in Singapore.

7. GLCs to enlist more Private Sector persons into Boards and Management

I would like to propose to the Government to appoint more private sector representatives on the Boards and Committees of GLCs. As for the appointment of CEOs and top management, Temasek should get the best person for the job, whether from the public service or from the market. From the public's point of view, we often have the impression that GLCs are the retirement resting place for ex-Ministers, top civil servants and MINDEF generals. I know this is not the intention. I recall that DPM Lee has said so in this House. But it does not help to clear this misconception each time we read about another ex-top civil servant or retired general being appointed to head a GLC.

More private sector representation means that there will be closer mutual understanding and trust between the public sector and the private sector. Fostering this mutual trust is important.

8. Encourage more MBOs and divestments to locals

I am very heartened to read about the progress of Mr Ang Kong Hua in leading an MBO to buy out NatSteel Limited from the shareholders. This is an excellent example of divestment of a GLC to good, safe and capable local hands. I would urge the Government to encourage more of such MBOs. Where appropriate, local Management Buy-Ins should also be considered. This is the reverse of MBOs where an external management group is allowed to buy in to take over a GLC.

In addition, since one of the objectives of the GLCs divestment is to create and jumpstart a larger pool of local entrepreneurs, I would recommend that wherever possible, divestment should be into the ownership and hands of local managers or local companies. We should avoid divestment of GLCs into the hands of foreign fund managers or foreign companies, since they have different business objectives compared to the locals.

9. More GLCs and Private Sector Co-operation as Cluster or Consortium

Sir, my ninth recommendation is to ask the GLCs and local companies to form clusters or consortia to bid for contracts and projects overseas. They can also co-invest as well. This is a very common practice in Taiwan, Japan and Korea. When a large Taiwanese company enters into a business overseas, such as into China, it will bring along a cluster of supporting Taiwanese companies to cover various aspects of the investment. This way, they operate as a very closely-knit business group. Japanese and Korean companies do the same.

Since the new Temasek Charter has earmarked certain strategic GLCs that can spearhead Singapore's external expansion drive, I suggest that each of these GLCs form a cluster of local companies that it can cooperate with to compete for foreign contracts. When a large GLC invests overseas, they can offer co-investment, partnerships or supporting business to the members in their cluster. Such clusters of companies can be formed around large GLCs such as SingTel, SembCorp, Keppel Corporation, PSA Corporation, and others.

10. Regular Study by Department of Statistics on GLCs' share of GDP

Sir, my final recommendation is that since the study by the DOS was done on GLCs' share of GDP in 1998, I would like to propose that the DOS be tasked to do regular study to update its report. It is important to continuously monitor the encroachment of GLCs into private enterprise.

Sir, I have made a long speech and covered much ground. At last, I have released off my chest a whole host of issues and concerns I have regarding GLCs, TLCs and NLCs. These concerns I have expressed are to reflect the concerns of the local businessmen and the man-in-the-street. Members of this House will have more to say on this subject as I note that there are over 20 MPs wishing to speak on the Motion.

Mr Speaker, Sir, may I conclude by expressing the hope that the Government leaders will heed our worries. I have spoken honestly and forthrightly of the fears of the private sector. I have also spoken sincerely with the interest of the nation at heart. I hope that the Government leaders will listen, take stock of what we have said, and give us satisfactory replies on the future roles of GLCs and Government in business. What we want is to do what is best for our national interests. We want to create world-class local companies led by capable world-class business leaders, who can compete against the best in the world.

Mr Inderjit Singh (Ang Mo Kio): Sir, unfortunately, I too have a long speech because I have got many issues to get off my chest, having spent a lot of time studying this issue as part of the Committee that Mr Raymond Lim heads.

First of all, I would like to share with Members the reason why I decided to move this Motion together with Mr Leong Horn Kee. As I mentioned, since last year, I have been involved in one of the ERC Sub-committees and, specifically, I was asked to chair a sub-group to study recommendations regarding the role of Government in business.

My committee, comprising key people from the private sector, GLC captains, SME businessmen and entrepreneurs, spent considerable time studying the many complaints and issues related to the Government's direct role in business and how GLCs have influenced the development of the Singapore economy. We concluded that while the route Singapore took for its economic development depended heavily on the Government's direct role in business, the results were not necessarily all that bad. While the brute force approach taken by the Government did yield the desired results, the question is, did the approach taken result in structural damages in the spirit of private enterprise and entrepreneurship? The answer we all felt in our committee was, to a certain extent, this damage was created. The next important question we asked was whether the same formula would work in the future and this round, the answer from all the committee members was a unanimous `no'. We felt that if we wanted to ensure good growth and economic development, we needed to change and the Government needed to reposition itself and there needs to be a different strategy from what we have been used to in the past, particularly by the Government and also how the GLCs operate. We then defined the new role and strategy and about 12 or so key recommendations to achieve success in this New Economy.

New Charter of Government-linked Companies

Let me come back to why I moved this Motion. Having released our report, we waited for the Government to respond. The greatly anticipated Temasek Charter was one key response we wanted to see and it came promptly. What I would like to see is a more comprehensive response from the Government to all our recommendations and therefore the purpose of this Motion. Because, if the Government does not give us convincing response to the serious recommendations put up by serious and concerned people of all backgrounds and which took us many months to develop, then I feel that we will lose our battle in ensuring the future growth and prosperity of Singapore, and the Government will lose its credibility in trying to remake the economy for Singapore.

The second reason why I moved this Motion is because I feel that the Temasek Charter, while addressing many key recommendations of our committee, did however leave out a few very important issues which have yet to be addressed satisfactorily by anyone. Also, the Temasek Charter lacked in specifics, so no one knows whether the changes will come fast.

Were GLCs Really Necessary for Singapore?

Sir, the first question we asked is: were GLCs really necessary for Singapore? I have said it before and will say it again that GLCs did have a significant and positive impact on Singapore's economy. But the question is, was it the only formula for success? Mr Leong touched on this too. My contention is that it is not necessarily so. When I heard the key people in Temasek and some Government leaders say that without GLCs, there would be no major industries coming out of Singapore, I cannot help but to disagree. Perhaps, yes, but it is also arguable that had Government been a little more patient, many more private sector companies could have moved in and become champions of some of our industries. It is also possible that the Government moved in too early. Is it also not possible that had the Government given the same opportunities and almost the same protectionist measures to private local companies as it gave to the GLCs, many private sector companies could have survived, succeeded and even made it big? Is it also not possible that if the Government had played a developmental role, instead of a direct role in business, they could have helped many more local companies develop into global champions? Why did the Government have to favour only GLCs? Why did it not also favour private companies in the same way?

I therefore disagree to a certain extent with the argument that had the Government not moved in as a result of market failure, private sector companies would not have moved in. And Mr Leong gave very good examples of Hong Kong versus Singapore to suggest that this view is not totally wrong. However, all this is history and is an argument not worth pursuing.

Now having developed an economy so crowded with GLCs today, do we still need a domestic economy fuelled by the Government through its companies? I am sure everyone will agree with me that we can no longer live with a formula which depends on GLCs playing in a protected domestic environment and not allowing private enterprise to bloom and having local companies, particularly the GLCs, which cannot effectively compete with global companies outside our shores.

The issue seems to be that we are being misled by our seemingly successful model in the past, and by the comfort of our domestic market and the fact that many GLCs have basically overstayed to the point that they are no longer capable in competing with foreign companies, either on our shores as our domestic market opens up or in foreign lands where true market forces rule and where the domestic protection no longer exists. Our GLCs are late in going global and they are facing the brunt of failing to compete successfully globally and by being `taken for a ride' in certain high profile acquisition transactions, in my opinion. If the Government fails to realise the negative impact of our GLCs overstaying in their old roles, we will see many more such sad stories of Singapore-based companies doing badly outside Singapore.

Professor Michael Porter from Harvard Business School was in Singapore, and Mr Leong talked a bit about it and I will not go through it. I would just like to add that he also mentioned, and I quote him, "The historical strategy has played itself out and is no longer robust", in addition to saying that the Government should get out of the way. His point was that the Singapore economy now has to be management driven rather than state driven, as has been the case for Singapore for a very long time.

This very well sums up the feeling of most people from the private sector and is the basis of many recommendations that my committee developed. We are not saying that the Government should suddenly back off. Neither are we saying that they should get out of everything that they have been doing. What we are saying, however, is that the Government needs to re-think and re-position itself with a brand new mindset so that Singapore can transform itself from a mainly corporate driven economy' to one of an entrepreneurial and innovation led economy'. If the Government succeeds in doing this, we will have a great future. If the Government fails to realise the need and fails to do something about this need to change, we will surely fail and collapse as did many economies and companies in all of history.

What are the issues with GLCs?

Why does Professor Michael Porter feel that the Government should reduce its involvement in business? Why are so many people from the private sector very concerned about the out-of-proportion role of the Government and Government-linked companies in Singapore? And what are the reasons for the failure of state-owned enterprises in other parts of the world? I would like to touch on some of the issues which arise as a result of the Government's involvement in business and which led us to the current state of affairs of having so few successful private companies. These issues will give Members a good feel of the type of discussions that my committee had when we looked at this issue. (a) Early Stages of GLCs Development

The first one is how GLCs developed in the early stages. While I agree that many of our GLCs which are publicly listed are doing well and operate very well, particularly in the domestic economy, and one of them, Singapore Airlines, has also done well globally, the issue was really in the early stages of the establishment and growth of GLCs. The general view is that the Government made very heavy investments and allowed these companies an easy access of money at less than acceptable commercial terms. Such investments by the Government gave the GLCs so much of strength that the private companies could not even think of competing with the GLCs. By sheer brute force, we created large companies, further over-shadowing any local private company trying to compete with the GLCs. So the issue is that we have developed many of our GLCs using a lot of muscles rather than brain power or entrepreneurial thinking. After many years of such a funding practice and facilitation by the Government, we created giant companies - again, as I mentioned - with a lot of muscles but without the necessary entrepreneurial management necessary to create world-class companies.

I have personally made assessments of a few companies that I know of and came up the way I described. I noted that when they have to compete and when they start competing where real market forces rule, and the companies that have been developing entrepreneurial type of path, they perform much worse than their competitors. Why is this so? Well, it is because of their well cushioned start-up and growth, and they never had to face the realities of life and they never learned to fight where a level playing field existed. In many cases, GLCs used the excuse of doing "national service" for the easier than commercial practices they took in running their businesses. Had the Government used commercial principles for such companies, this would not have been an issue today. But having been listed, I believe, they came on to market practices. But the issue was before these companies were listed, how did they come about?

Sir, the second issue is one of incestuous relationship among GLCs and Government agencies and an unlevel playing field, which Mr Leong talked about. One of the problems which develops when the Government also gets into business, especially when the regulator also competes with companies it regulates, is the unfair advantage the regulator's related companies get. Similarly, the Government agencies seem to give many contracts to GLCs and some examples include the Singapore Food Industries supplying food to MINDEF, Singapore Technologies supplying equipment to MINDEF too and most of the Government agencies getting its computer and IT services from GLCs. The issue, whether perceived or true, is a big issue when viewed by everyone outside the Government and its agencies. The way tender documents are written could also be a reason why such contracts get issued.

Another issue related to the unlevel playing field is how banks rate subsidiaries of GLCs when deciding on financing them, and Mr Leong talked about his personal example in the joint venture. While it is not a direct problem created by the Government, it does exist and private sector companies which may have better balance sheets than the GLC subsidiaries may not be able to get the financing while the GLC subsidiaries get such financing easily. The only suggestion I can make here is that Temasek and the Government must come out and make a very clear statement that none of its companies and subsidiaries will be rescued by them should they fail, and that banks must credit rate all the companies and subsidiaries on their own merit and not on the backing of the Government.

Sir, this issue needs to be resolved by the Government and it is about time that we got a good explanation as to why many such relationships exist today and find a way to inject fairer practice. Statutory Boards Owning Companies

Sir, the third issue is one of statutory boards owning companies, and this has been building up over the years. There are many examples of such companies under statutory boards, like JTC, IE Singapore, Spring Singapore, HDB, and a few more. And then there are also all the NTUC owned companies, which Mr Leong talked about. The issue is how is the accountability of such companies handled. No one gets a look at the practices, corporate governance issues and performances of such companies, except for the parent Government agencies. While we can accept that Temasek is trying to practise high standards of corporate governance and will insist on high standards for all its companies, how can the Government assure us that there is also a standard practice for all the companies owned by its agencies? For example, Temasek is now very closely watched by everyone, inside and outside the Government, and Temasek has also revealed its latest Charter and, in doing so, has promised a certain standard of performance. But what about all the other companies not reporting to Temasek? None of the statutory boards has issued a similar charter.

The Government should be very concerned about this and get serious about either closing such companies under statutory boards, or to immediately transfer all existing companies to Temasek, so that Temasek can inject a higher standard of corporate governance into such companies. Currently, all such companies are flying, what I call, below the "radar detectors" and there is very little visibility and a lack of transparency and this is not a healthy thing.

The Government should go one step further to disallow any statutory board from forming companies and if it becomes totally unavoidable but to set up a company under the statutory board, it should include a timetable for an exit, or a timetable for moving the company to Temasek for ongoing management at the point of time they decide to set up the company. This approach will inject some discipline into statutory boards when they try to set up their companies. People Running GLCs and Organisational Culture in GLCs

Sir, the third issue is one of people running GLCs and the organisational culture in GLCs. This issue, while a sensitive one, needs to be discussed. I asked the question of whether we have an entrepreneurial management and a culture of innovation and risk taking among the people in the boards and management of GLCs earlier. The answer probably is that we have some who have the entrepreneurial approach and take the necessary risks as entrepreneurs would and these are people who have managed to change and make the switch from a civil service mentality to one of a private sector manager. It is difficult to believe that a majority of those running GLCs have the necessary mindset and skills to run companies, like private sector players, simply because for them, the GLC role is just another job posting for their career. Many have been handed the jobs on a silver platter and with all the necessary muscles to help them manage the business. There is very little incentive for them to make tough decisions and to take the necessary risks as entrepreneurs would. Why should they risk it, when their career path is being ultimately planned by the Government and its agencies? I feel that it is this culture and the lack of the entrepreneurial management I mentioned earlier which caused PSA to lose its business to a much more entrepreneurial Tanjung Pelepas and which caused SingTel some years ago to lose its deal on Cable and Wireless to Pacific Century of Hong Kong. Both took too long to react to the changing markets because of the strong mindset of a state driven culture.

I feel that, along with the goal of making GLCs look more like private companies, Temasek and the Government should also make the changes in the way management and board members are selected for GLCs, and Mr Leong talked about this.

Sir, in the last few months, we are starting to see many changes at the board and the top management level of GLCs as a result of the board level changes in Temasek. I welcome this move, but would like to question Temasek why it took them so long to do this. Obviously, we have lived with the problems for so many years and along with it, perhaps left the management weaknesses and inefficiency in place for too long. Can we afford to let Temasek do such housekeeping only once in 10-20 years? Surely, the answer is no, as Temasek should constantly be reviewing these things. It is critical that Temasek has a proper process in place to ensure it selects the right people to run its companies and has a good system to audit and review leadership in its companies.

Crowding Out Effect

Sir, the fifth issue is one of the crowding out effect that Mr Leong also talked about. The issue of the GLCs crowding out the private sector and stifling entrepreneurship and the private enterprise among Singaporeans is a big and real issue and should be addressed quickly. That is why Prof. Michael Porter's exact words were, and I quote, "we have to get the Government out of the way". Before the Government tries to convince Singaporeans that it is interested in promoting an entrepreneurial economy as opposed to a corporate economy driven by GLCs and MNCs alone, it must first settle the issue of whether it is willing to leave the battle field. My reading is that the Government has a half-hearted view on this and when key people in Temasek say that they will get even stronger and not weaker in the domestic market, it confirms my view of the half-heartedness. If this is so, we have almost lost the battle of promoting entrepreneurship.

Even if we accept the argument that, in the past, the Government had to move into certain industries due to market failure and play a developmental role, is it not about time for them to be exiting these industries, especially when there are enough private sector companies which can do a better job? How many can really play effectively in our small market? How many are indeed thinking of going global? Who are the best to lead the globalisation challenge? Obviously, the GLCs are the ones as they have the muscles in place.

In my opinion, if Temasek, or any one of the companies, wants to start a new business, the onus should be on Temasek to articulate and convince the public why it is in line with Temasek Charter and why there are no private sector companies capable of doing the same job. In this way, instead of GLCs using their time and resources to find ways to do more business locally and therefore getting into businesses like the roast ducks and the Delifrances, they should see how they can more effectively go global with the same resources. We know that, because of the sheer size and their resources, GLCs can beat many local companies in the same area they compete in, but is this really a useful exercise for the country because, at the end of the day, we are all playing for the same result? And how long can the GLCs continue to milk the domestic markets?

New Role for Government in Business

Sir, I have listed many issues which are a result of the Government's direct role in business. As I have stated earlier in my speech, we need to define a new role for the Government if we want to successfully restructure our economy. I am not saying that we should destroy the role or destroy GLCs, but acknowledge that GLCs do still have a role to play in the future. To be fair, therefore, we should not ask the Government to completely exit, nor destroy value which has been created over many years.

Sir, instead of going into the specifics of the recommendations which are in the Report that was published, I would like to talk about some statements on how the Government should be positioning itself. The first and the most important commitment we need from the Government is that it is willing to change its mindset and to get out of the way where private enterprises can do an equal or better job and if they can do a job not better than GLCs, then help the private companies improve, rather than to continue to let GLCs grow. As I mentioned, the Government cannot be half hearted about this. A clear statement needs to be made. From a national perspective, effort put in to groom local companies has the same value as in trying to groom GLCs. With this mindset change, many more things can be done and these are the things that we have recommended in the report of the EISC under the chairmanship of Mr Raymond Lim.

Secondly, instead of considering each other as competitors all the time, we should build a culture of trust and partnership among GLCs and local private companies. Until today, there has been too much of suspicion and distrust. If we could change this culture to one of partnership and cooperation, then together head towards global market as a team, our chances of success will be greatly enhanced. All companies, big and small, should focus on how they can leverage on each other's strengths as competitive threat to foreign companies in a global market. The Government could play a very useful role in facilitating this.

Third, the Government should be focusing more on playing a developmental role rather than a direct role in business. In creating a conducive environment and allowing private companies to test-bed their products and services, it will go a long way in helping to create stronger local companies. Similarly, instead of taking the easy way out of creating a new division under a GLC, or to form new companies within the statutory boards, the Government should encourage the outsourcing of products and services as much as possible as is being done in many countries, including US and the UK. The current practice of GLCs creating subsidiaries after subsidiaries is no longer acceptable.

Fourth, there is a great lack of risk capital available for private companies. The many VC funds we have in Singapore are focused on later stage financing. The Government could move in and play a role of a risk capital provider, either directly or indirectly through the GLCs. Instead of just focusing on creating companies, the Government and its agencies, including Temasek, should make more risk capital available to the private sector and focus on facilitating the development of new private sector companies.

Temasek's Response and its Charter

Sir, the final topic I would like to cover is my response to the Temasek Charter and on areas which I feel are not adequately addressed. The first one is that there is no statement of greater transparency in Temasek Charter. I was a little disappointed that nothing has been said about how Temasek will be much more transparent than it has been all this time. If the public is to have confidence that Temasek will be professional in running its companies and if we want everyone to feel comfortable that once Temasek is in charge of any Government created businesses, decisions will be made on commercially acceptable terms, then we must take the necessary steps to build the trust first. I therefore hope that the Minister for Finance will put in place sufficient mechanics to ensure that Temasek will remain as transparent as possible. If Temasek is indeed doing the right things, then there is no reason to fear and resist greater transparency. While I have the confidence in many of the people in Temasek, I also feel that it is a little too reckless for us to just depend on a few people for things which have a tremendous impact on the Singapore economy. I therefore again ask for more transparency and, along with it, greater accountability from the people in charge. Similarly, we must have greater transparency from GIC and other Government agencies managing public funds.

Perhaps, Temasek should release, as Mr Leong mentioned, an annual "state of the GLC" report for Singaporeans to understand what goes on in Temasek. The real question is, while Temasek audits its companies, who audits Temasek? Is it good enough to leave it to a few people in Government to audit itself? And I think this traditional practice is no longer convincing to people.

Divestment - Form and Timing

Sir, the second thing that was not adequately covered in Temasek Charter was its policy on divestment - the form and timing of it. While Temasek has mentioned its desire to divest businesses which are non-core and which are non-strategic, it has not spelt out how it plans to do it and what the timetable is. I recall, when the EISC released its report suggesting a divestment strategy for GLCs, the first reaction from the members of the press was - so, what is new, and they were referring to a report, which Mr Leong also mentioned, which they called the Michael Fam report about divestment of GLCs. Their point was that there have been no significant divestments, some but not fast enough and, on the contrary, as Mr Leong pointed out, there are many more GLCs that have been created after that. I therefore would like to see a clearer statement from Temasek and the Government on its divestment plans, including divesting by non-traditional ways like MBOs and JVs. The NatSteel way was one example of such a non-traditional approach.

Being fair to SMEs

Sir, the third issue is one of being fair to SMEs. One complaint which has been brought up to my attention is the business practice of bigger companies, in particular the GLCs. The issue, among others, includes one of payment terms and paying on time. It is almost described as a "bullying tactic" by a number of people I spoke to, and this was brought up in some of the Feedback sessions that I chaired.

As I studied this issue, I learned of two examples which should be role models for Temasek to follow, and for the Government too. The first, I realise, there existed a directive from the Prime Minister's office in Malaysia, instructing all its agencies to be fair to local companies and to pay promptly, and should local companies feel that they have been unfairly treated, the Prime Minister's office will investigate into the matter. The second practice, which is more widely known, is the practice of the oil giant, Shell, which has a special audit committee which ensures that all its suppliers are paid on time and fairly treated. I was told that in Shell, business units find it so tough dealing with this audit committee that they rather spend their time treating their suppliers fairly than to face the brunt of this committee.

Sir, I am not suggesting that the "bullying phenomenon" is rampant in Singapore and is being widely practised by the Government agencies, but it would be prudent to set up a similar committee in Government and one in Temasek, so that we send a strong signal that the interests of private companies are well taken care of.

Sir, in conclusion, I would like to urge the Government to give a concrete response to the EISC recommendations and to address the missing gaps which I have mentioned. I feel that if we are indeed serious about making the transformation from a corporate to an entrepreneurial economy, the Government should immediately resolve all the issues which have been raised, and to operationalise the many recommendations the EISC has made.

Mrs Lim Hwee Hua (Marine Parade): Mr Speaker, Sir, thank you for allowing me to join in the debate. I would like to declare my interest as an employee of Temasek Holdings.

Sir, the Motion is, in essence, a discussion of the role of Government in business, whether the Government is a regulator, promoter or a participant.

This is an important discussion, but it derives meaning only when it is made in the context of the realities of the marketplace that Singapore competes in. I would like now to offer my take on two harsh realities.

The first reality is of increasing globalisation. Increasing globalisation of the marketplace is not an option nor a passing fad, but is a reality that we have to address head-on as an on-going challenge. Globalisation has real significance for us in Singapore as we do not have our own hinterland, unlike major markets like the US or Europe. The lack of a hinterland is most keenly felt by Singaporean entrepreneurs and companies who have already ventured abroad. We have no critical mass of our own and cannot pretend that we can sustain businesses purely domestically.

Some Singaporeans have asked if we can pump prime our economy or consume our way out of a recession, and the answer is no. Our economy depends too much on external demand for us to be able to prop the economy up by merely raising expenditure. Hence, to sustain economic growth, not only do we have to ensure there are enough inbound investments, but we have also to source growth potential from outside Singapore as well.

Imagine if Singapore Airlines were to just fly mainly Singaporeans from Singapore to other destinations, and no one else, nor from anywhere else, then it would not have half the chance of Ansett and would have folded up long ago. Or that if Singapore Telecom were to just cater to the domestic market, growth would require organic expansion domestically and increased usage of telecommunication services or, in simple terms, we all need to talk a little more over the phone. Or that if Yeo Hiap Seng had remained in Singapore, with our low population growth rates, how many more tins of chicken curry and packet drinks can Singaporeans consume?

In short, expanding outside Singapore is no longer a wish but an imperative for most businesses, regardless of ownership. We have to get out of our comfort zone. We must now think GNP (Gross National Product) and not GDP (Gross Domestic Product).

Sir, the second reality is one of intensifying competition. Increasing globalisation brings with it pressure to break down protectionist barriers, and hence heightened competition. In a free market such as ours, fierce competition from all players, big or small, local or foreign, has already been felt. This is most evident in the retail sector. Take the supermarkets, for example. I recall, when I was young, going to the NTUC Welcome Supermarket at Beo Crescent was a real treat. Nowadays, it is almost a must for most working couples. It is therefore almost inevitable that the smaller provision shops will find it tougher to compete unless they offer that something special. We may think that NTUC Fairprice, as it is called now, has it easier. But they too have to compete against foreign-owned players like Cold Storage.

So what is our response? In the face of these externally-driven challenges, we need not despair. However, we need to examine our position from the following two perspectives:

1. What are our skills and strengths that we can leverage on to get out of our comfort zone; and

2. How do we position Singapore? Who are the players here and how can they relate to each other?

Firstly, on skills and strengths. Over the years, we have built up substantial expertise as a services hub in airport and seaport management, telecommunications and financial services. Hence, we should be actively seeking ways of exporting these capabilities abroad. For example, we should not centre our airport management services around yet more terminals at Changi but at other regional or Asian airports. Likewise, whatever seaport management expertise we have built up over the years, eg, in vessel connectivity, should be actively promoted elsewhere as well.

Our human capital should not be ignored too. As a people, we have been respected for our integrity and diligence. These are useful values to build management and the labour force at large upon. We should certainly not be arrogant but be prepared to explore foreign postings as part and parcel of our working lives. Getting out of our comfort zone is not easy, but if we accept that it is not only inevitable but that it can also be a rich experience, I believe we can all become better contributors.

Sir, the flip side to identifying our strengths is the need to validate the tried-and-tested success formula. Industry and market conditions are now changing with a vengeance. Hence, we need to constantly check our assumptions. What has worked well before in terms of achieving pure efficiency may now be a value-for-money proposition. This is well illustrated within the logistics area where value is sometimes defined as "getting goods off the balance sheet" rather than shipping to the destination in the fastest possible time. In a nutshell, we must test every assumption.

Secondly, identifying roles of players. Sir, the Motion revolves around the role that each sector should play in building GDP. According to the official statistics, the table of which was circulated by the hon. Member, Mr Leong Horn Kee, the MNCs accounted for a 42% share, followed by an implied 36% share by the non-GLC private sector, 13% by the GLCs, and 9% by the public sector. However, unlike Mr Leong Horn Kee, I do not think it is complete to discuss the relative shares of GDP on a locally-owned basis, as it ignores the role that MNCs play. We should not limit ourselves to the many possibilities that the MNCs can interact with our own enterprises.

In light of the significant role that MNCs play, the EDB's efforts in promoting investments must continue full steam ahead. Last year, the EDB managed to secure some $9 billion worth of investment commitments. This is no small feat and demonstrates that Singapore has indeed been nimble-footed. We must continue to have this mindset, both the Government as promoter and the people as human capital.

Whilst investments by MNCs have helped spur and will continue to spur the development of supporting cluster services, we need to build up our own capabilities, our own enterprise, for both GLCs and the non-GLCs in the private sector. Some of the GLCs, as we all know, have evolved with Singapore's history. They nonetheless still need to hold their own in the global marketplace. They must do this by building on their core competence to continue to expand outside Singapore.

Sir, the imperative is equally applicable to the non-GLCs, as the marketplace does not differentiate between ownership, whether it is Government, private, local or foreign, but only the level of competitiveness. Pooling of interests can therefore be mutually beneficial. Towards this end, given our limited resources, collaboration must surely be the name of the game.

But collaboration can only exist and be meaningful if mutual benefits can truly be derived. I would urge both GLCs and non-GLCs, especially the small and medium enterprises, to identify common areas of focus, say, within a cluster, where collaboration is possible. Similar collaborations between MNCs and local companies should also be actively structured and pursued. I would also urge the relevant Government agencies to be more focused in their promotional efforts and to emphasise substance over form. For example, do not be too preoccupied with the degree of participation in trade delegations but with the number of concrete business ventures or relationships that result from a trade delegation's visit.

On that note, Sir, I support the principle of promoting private enterprise and entrepreneurship in Singapore. However, Sir, whilst we should certainly spend time and effort to address specific concerns of the private sector, we should take extreme care not to quibble excessively over domestic space, as the world may just pass us by.

The Minister of State for Trade and Industry (Mr Raymond Lim Siang Keat): Mr Speaker, Sir, I have listened with great interest to the speakers before me. I guess nothing more wonderfully concentrates the mind than to have a Motion that debates the recommendations of a sub-committee in which the paternity ultimately lies with oneself. I would however like to thank but not implicate Mr Inderjit Singh for the work that he did as Chairman of the Focus Group on Government in Business.

The EISC released the part of its report dealing with Government in Business on 30th May this year. The Temasek Charter took this into account. The full report of the EISC recommending ways to strengthen the spirit of entrepreneurship and innovation in Singapore and to foster the growth and internationalisation of Singapore-based companies will be released in September.

Sir, I thought it would be useful to give Members some perspectives on the thinking that went into the EISC's recommendations. But, first, let me deal with one recommendation that was strongly urged on the sub-committee but which we did not adopt. This was to recommend a huge sell-off of the GLCs to the private sector, or what the press has dubbed a "Great GLC Sale". If we had done that, then we would have gone far enough and bold enough, I think, in their view.

The principal case for rapid privatisation is that it will significantly improve the performance of the GLCs. To support this contention, its proponents often cite anecdotes of under-performing state-owned enterprises, rather than systematic studies. Anecdotes are, of course, better than nothing, but they are weak foundations to base economic policy prescriptions. The problem with anecdotes is that the contrary case can always be cited. For instance, the argument here is that there is something inherent in Government ownership which causes state-owned enterprises to under-perform. Singapore Airlines is a company with substantial Government ownership but, as we all know, it is one of the best airlines in the world. Then, there is Changi Airport, which is wholly owned by the Government, but that has not stopped it from being consistently voted by business travellers as the best of the breed.

Anecdotes often reflect the fashion of the times. When I was a student in the 1970s and 1980s, the prevailing school of thought then was that the state should play a leading role in the market. It was called "governing the market", and Japan and Korea were cited as stellar examples of this. Lester Thurow wrote a book "Head to Head" in which he predicted that unless America took a leaf out of Japan Inc's strategy book, it would be cleaned out by the Japanese in the global marketplace. That book topped the best-seller list and, for an economics book, that was really quite an achievement. Today, if we were to suggest this, we would be dismissed by derisive laughter.

The fashion of the 1990s had been privatisation and market liberalisation. This Washington Consensus has led the IMF and the World Bank to urge developing countries to privatise rapidly, privatise even when critical complementary conditions are not present - competition, hard budgets and commitment. The result is not pretty.

So, before we rush off and join the chorus that "Government ownership invariably leads to inefficiency, and private ownership is the way to raise the performance of the GLCs", we better ask ourselves what is the empirical evidence to support this policy recommendation. I have plowed through the literature and the bottom-line is that there is no conclusive finding that this is indeed the case. The World Bank commissioned a study which was released in 1995, "Bureaucrats in Business" and it said that in competitive markets, there was an edge to private ownership. "An edge", not a mountain of evidence that private ownership would indeed enhance efficiency in state-owned enterprises.

Why is it not more decisive? The reason lies with the basis of the argument for privatisation. At its heart, the privatisation argument posits that private owners, unlike Government owners, have a greater economic incentive to maximise shareholder value, as they would benefit more directly from such actions.

Unfortunately, this is not necessarily the case with large enterprises. Large enterprises - private or Government-owned - suffer from the same incentive problems. In a large private company, the separation of owners and control leads to substantial management autonomy that allows managers the discretion to act in their own rather than shareholders' interest.

To begin with, there is a significant information asymmetry between the owners and the managers. The managers will be able to run circles round the shareholders as they have the information advantage. The acquisition of the requisite information incurs economic costs. This problem is then compounded by the fact that good management is a public good. If one shareholder acts, then all benefit. And in the nature of such a good, this free rider problem would negate the incentive for a small shareholder to monitor the firm's executives. To ignore information costs in an analysis of organisational behaviour is like having Hamlet without the Prince.

We need look no further for evidence of this than in the corporate scandals that are now rocking Wall Street. Has there been, in recent times, any destruction of the public interest greater than that by the senior executives of Enron of their shareholders? Yet Enron was a company that was owned by private shareholders, not the US government.

If we were tomorrow to divest completely the Government's stakes by issuing shares in GLCs to all Singaporeans, this will not lead to enhanced performance of these companies. People's capitalism, as some Eastern European countries had practised since the wall came down in Berlin, suffers from the fact that there are few shareholders with sufficient amounts invested in the companies so that they have a strong enough economic interest to ensure that the firm is well-managed.

This was why the EISC did not recommend a "Great GLC Sale" as some had hoped. Privatisation may have the edge in raising efficiency but it is not a given and it raises the question as to who the GLCs should be sold to, so as to ensure direction and control.

In any case, as Mr Inderjit Singh has said, the way we saw it, the central issue was the proper role of Government in business in this innovation-driven world. In the early post-independence years, the Government was the entrepreneur as it took entrepreneurial risk by investing in companies such as Singapore Airlines, Neptune Orient Lines and the shipyards. There was then a dearth of private capital to embark on these kinds of project. As both Mr Leong and Mr Singh have said, today, with well-developed markets, the case for direct Government involvement in business is much less compelling.

This was the basis on which we recommended that statutory boards should adopt a Yellow Pages rule. This means that statutory boards should not set up enterprises when there are private sector players that are providing or able to provide the service. In fact, statutory boards should seize such opportunities to provide business to the private sector.

It may well be that companies owned by statutory boards, with proper incentive structures, could provide the service as efficiently as the private sector but the issue is what should be the role of these boards. Our view is that if the market can provide it, then these Government bodies should concentrate on regulation and promotion of business activities rather than be in business themselves.

Some have criticised this Yellow Pages rule on the ground that some of these statutory board-owned companies fulfill social goals. Like all rules, there can be exceptions to it but I would be slow to make them as even when there are social objectives, this can be written into the contract for the provision of these goods or services by the private producer. For example, take broadcasting. If it is deemed desirable that all television stations must have a news segment, this can be written as a condition of the licence. If additional public service broadcast programmes are deemed desirable, then rather than for the Singapore Broadcasting Authority to produce them, it can provide for them by paying the broadcasters to do these. This is, in fact, what the SBA is doing, rather than going into the business of public broadcasting itself.

In the case of the GLCs, it does not make sense for the EISC to recommend that they abide by the Yellow Pages rule. As Mr Leong has said, the horse has already bolted from the stable. It is in this context that we recommend that Temasek divests its non-strategic assets so that it can concentrate its resources in areas where it can make the most difference.

However, the key, we believe, to pressure GLCs to perform is competition. It is telling that our two Government-owned world-beaters - SIA and CAAS - operate in a globally competitive environment since their inception.

Hence, we started our report by recommending a competition law. Competition provides the incentives for individuals and companies to perform. It allows a benchmark to assess performance so that proper rewards and penalties can be instituted.

But competition will only pressure GLCs if they face a hard budget constraint. This was why we argue that there should not be subsidies, privileges or other forms of soft capital that will enable them to compete without improving efficiency. A hard budget will also address the oft-repeated concerns of private firms that they face unfair competition from the GLCs.

Now, competition and hard budgets will only work if there is a Government commitment that the GLCs are to be run strictly as commercial entities. This means that the Government must not interfere with the operations of the GLCs such as hiring and firing managers and workers and stopping money-losing services. Social and political goals that the Government might have should not be part of the objectives of the GLCs.

These are the enabling conditions that the EISC felt would help enhance the performance of our GLCs. Though the evidence may be slight when it comes to whether privatisation alone makes a difference to GLCs' performance, it is unambiguous that a comprehensive strategy of divestiture, competition, hard budgets and commitment, pursued as a whole, will help create the conditions necessary for growth and performance.

Thus, to those who argue single-mindedly for a "Great GLC Sale", they may wish to note that "there are more things in heaven and earth than are dreamt of in their philosophy." 4.52 pm

Dr Wang Kai Yuen: Mr Speaker, Sir, the Government's involvement in private sector business started way back, almost about the same time as Singapore's industralisation effort, soon after the British withdrawal in 1968. To handle the growing Government's involvement in business, Temasek Holdings was established in 1974. Presumably, flushed with success, Government's involvement in the private sector continued to proliferate.

To address the public concern, the rationale for Government's involvement in private sector was laid down by Dr Goh Keng Swee, DPM and Minister for Defence, at the Income's AGM on 20th June 1977. Typical of Dr Goh, he gave the reason in very simple terms and to the point. I would like to state them to refresh our understanding of the basic rationale.

Firstly, he stated that Government's involvement was to encourage the private sector to take the plunge through joint ventures. He gave the example of National Iron and Steel, Jurong Shipyard, National Green Elevators, Sugar Industry of Singapore and so on. And as the economy grew, the Development Bank of Singapore and Intraco were established to fulfill what Dr Goh referred to as new needs.

Secondly, to meet specific needs, Primary Industries Enterprises was set up to process agricultural products by local farmers - a pretty old industry, I must say. Falling into this category of specific needs, we find the Mindef companies established to meet the needs of the SAF.

Thirdly, to handle the odd case here and there. Dr Goh gave the example of Singapore Food Industry to tackle the problem of corrupt practices among cooks employed by Mindef leading to the failure of the tender system in sourcing for meat and vegetables. Presumably, Dr Goh raised this matter in public to address some of the public concerns. It is interesting to note that the principles laid down by Dr Goh are ingrained in Temasek Holdings' latest Charter as well where it has classified its companies into Group A and Group B. In Group A, we find companies where Government would like to retain control and ownership for strategic reasons and in Group B, we find companies with regional and international potentials.

Sir, despite Dr Goh's assurance in 1977, Government-linked companies continued its expansion into the private sector. In August 1983, in this House, Dr Toh Chin Chye put the question to the then Minister for Finance, Mr Hon Sui Sen, during Question Time as to whether the Government companies should be allowed to crowd out the private sector. Of course, Dr Toh did it in his very colourful language, referring to the case of PIE flying in 1,500 breeding pigs by jumbo jets. Apparently, Dr Toh must be referring to the fact that PIE was engaging in some activities that the private sector could perform which contravened the principle laid down by Dr Goh. Unfortunately, there was no definitive response from Government in that particular exchange. Clearly, I think, by then, the tentacles of the GLCs have grown so numerous and so pervasive that no one single agency has total control or oversight on the reach of the GLCs.

Sir, public complaints about Government's involvement continued through the years with the pitch rising during times of economic slowdown and adding in times of economic booms. After the formation of the Feedback Unit in 1985 under my good friend, Dr Tan Cheng Bock as Chairman, there exists now, in its archives, a collection of public comments on this particular topic. I would like to give a sample of these comments to indicate the gist of public complaints over a period of the past 20 years.

Sir, in 1985, Dr Dixie Tan, then MP for Ulu Pandan, in a note to Matthias Yao, Head of Feedback Unit then, wrote, "Government companies are competing with local companies in every area and with unfair advantage. Even abroad, private companies have to compete against Singapore Government companies." In the same year, Mr Tan Tuan Seng wrote a letter to the Feedback Unit regarding the uphill task of budding entrepreneurs in Singapore facing stiff competition from GLCs. Under the heading, "Better Entrepreneur", he lamented that the playing field was uneven with GLCs having all the resources and all the work references.

Sir, now I would like to share with you some of the more recent comments received by the Feedback Unit. In July 2001, a contributor commented that the SME and the coffeeshop network is filled with complaints about GLCs and Government statutory board corporations. Is there a need for Government to compete with the citizens for jobs? If GLCs and these corporatised statutory boards exist to complement the economy, they should take this time to outsource more of their jobs to locals. Why corporatise statutory boards like Civil Service College, PSB, IPT and many others? The complaints are greatest now if the Government is the regulator and the player in the market.

Again, in August 2001, on the feedback on PWD Consultants, a commentator said so, "The Government is releasing public jobs that account for 70% of the construction work now to ease the slowdown but these jobs are headed for GLCs that have a moratorium in a way. Such public works should be distributed to the private sector to ensure that the private sector stays afloat. In recent years, the moratorium has increased from two years to five years and now more and more GLCs are being privatised to compete in the private industry."

Mr Speaker, Sir, I took time to bring up this example to highlight that over a 20-year period, the views expressed were basically the same. In other words, nothing very much has changed despite all this feedback. It is also disturbing to me that it took the more severe recession in our history to make the Government sit up and set up the EISC, and then pay attention to this complaint. It is pertinent to note that many of the recent comments received by the Feedback Unit were made before the formation of the Economic Review Committee.

Sir, regarding the work of the Feedback Unit, I would like to point out that there is a group within the Feedback Unit known as the Economic Development Group. It was set up under the leadership of Dr John Chen, the former Chairman of the Feedback Unit. It is a loose association of feedback contributors who gather about once a month to discuss topics of interest.

The Economic Development Group formed a sub-committee on developing a pro-enterprise environment in the new economy. It submitted a recommendation in April 2001. That report talked about how to create an environment that is pro-entrepreneurial and pro-business. And in the 2002 annual conference of the feedback group in July this year, Mr George Abraham presented a paper on the remaking of the Singapore economy incorporating the work of the Economic Development Group and the SME Feedback Group. It is interesting to me that many of these views were reflected in the recommendations of the EISC Report. It is heartening that the views expressed by the feedback contributors have found sympathetic ears in the EISC. I believe that the Feedback Unit has contributed to the review of Government's stand on this matter. I would like to thank the many contributors who have played a part in moulding public opinion on this topic.

Mr Speaker, Sir, next, I would like to explore whether the EISC Report, the new Temasek Charter as well as this debate on the Motion will be effective in curtailing Government's involvement in business. Based on the behaviour of the Government in establishing GLCs over the past 20 years, I must say that I am not optimistic. I am not saying so because I think we are not serious about doing what is best for Singapore. I am saying so because there are factors involved. Firstly, I believe that when good times come back, this issue will also recede from the public consciousness, and the pressure will not be that great.

Furthermore, Sir, I think we have to go to the fundamentals and perhaps try to understand the forces that have been driving the ever increasing Government involvement in business. Unless we understand these factors and take the appropriate steps to mitigate them, I think Government will continue to spin off companies. Just by observing the outcomes, it seems to me that there are powerful forces pushing the various Government departments, agencies and statutory boards to spin off companies. I am not saying that there is a directive of the Government to do so. But it is just that doing so is a well beaten and tested path.

What are these forces? Firstly, spin-off allows the various Government departments to shed excess manpower. It seems to me that Government departments, like everyone else, need to stay young and relevant, and they do so by recruiting younger staff and inducting Government scholars. Therefore, spinning off groups to form private companies helps to keep the total number of staff small which is, as we all know, an objective of the civil service guidelines.

Secondly, hiving off assets helps to reduce the asset base of these organisations. Of course, such assets were assessed at the proper values and the Government did not suffer in privatisation. However, in the books of the parent departments and organisations, that base is reduced.

Two recent examples come to mind. Firstly, Acasia of JTC and, secondly, PWD Consultants. Both organisations were granted moratorium from competition to entice staff to leave the comfort zone of the civil service, and to take the plunge into the private sector.

Mr Speaker, Sir, I have also, on a previous occasion in this House, touched upon the public perception regarding the existence of corporatised entity helping the rejuvenation of the civil service and the SAF through parachuting senior officers into such GLCs. I understand from the DPM that the employment of all these staff by the GLCs is through the market force. However, this perception remains.

Sir, I think these factors driving the formation of GLCs are powerful ones, and they are unlikely to go away just because of this debate in Parliament and the adoption of the EISC Report. I believe it will require a strong commitment from the Government to stop the continuous encroachment into the private sector. Whether the Government would do so will depend on the answer to the next question I have in mind.

The question is: is the existence of GLCs contributing to the dearth of entrepreneurs in Singapore? We do not have definitive answers but I believe there are sufficient indications that this is so. For instance, many young and capable people will be asking themselves why should they take the risk to start their own companies if they could become CEOs of GLCs just by going through the academic route - be Government or SAF scholars, perform well in the public sector and serve their term. My friend, Mr Inderjit Singh, has mentioned that the career path will be taken care of and the system will take care of them, and they will become corporate captains of large corporations sometime down the road. At least, that is what many young men and women will conclude by observing the career path of the many CEOs of GLCs today.

Sir, is this perception good for Singapore? In my mind, it is doubtful whether men and women who are used to a command and control environment would necessarily make good entrepreneurs. Some of them would make it, but perhaps after some very painful experience at the expense of public money. I believe many of us could think of examples that illustrate my point. On the other hand, several of the really successful companies that continue to do well in this recession in Singapore are small companies started by entrepreneurs, and I could name a few - Hyflux started by Olivia Lum who is now an NMP, Osim started by Ron Sim and Accord Express, a company mentioned by PM in his National Day Rally speech. These are true entrepreneurs and Singapore would do well to have more of them. Thus, while creating more GLCs might be the expedient thing for the Government to do in the short term, it might actually be detrimental to the long-term viability of Singapore in a fast changing world. Only when we are convinced that this is the case would the tendency and propensity to create more GLCs in the future be curtailed.

Sir, while I am supportive of the new Temasek Charter and the recommendations of the EISC, it is important for us to address the fundamental questions I raised. Only when we accept the answers honestly and with a clear mind would we be able to avoid the pitfalls of Singapore evolving into an outwardly private sector economy but actually dominated by the GLCs, an economy which we affectionately refer to Singapore Incorporated, an economy that will perform well but will flounder and look for guidance in bad times. To me, Sir, how the Government decides on this particular matter will determine whether Singapore will evolve into a high performance entrepreneurial economy or will always remain an economy that is tied to the umbilical cord of the Government.

The Senior Parliamentary Secretary to the Minister for National Development and Minister for Defence (Assoc. Prof. Koo Tsai Kee): Mr Speaker, Sir, Mr Leong Horn Kee spoke about the differences between Hong Kong and Singapore, how Hong Kong has become a nursery of entrepreneurs while Singapore is really a desert. I would like to continue this analogy between Singapore and Hong Kong and set the substance of my debate in this context.

Singapore and Hong Kong are successful city states. We are the envy of countries big and small. Every time a country like East Timor gets independence, they say they want to be like Singapore. We have arrived today at our positions by very different routes. I need not elaborate. Hong Kong grew with minimal governance - a bottom-up approach - while Singapore largely prospered because of Government's top-down approach. Hong Kong is trying to be a bit like Singapore. Singapore is trying to be a bit like Hong Kong.

[Mdm Deputy Speaker (Mrs Lim Hwee Hua) in the Chair]

5.10 pm

The Senior Parliamentary Secretary to the Minister for National Development and Minister for Defence (Assoc. Prof. Koo Tsai Kee): Today, after 30 years of relentless economic growth in both city states, we have reached a crossroad. Hong Kong and Singapore are pausing, taking stock and both are scratching their heads, but I think these questions of how to go forward from here focus the minds of both governments. But in the case of Singapore, fortunately, because of our industrial policies, much criticised no doubt, I think we have more levers to pull than Hong Kong - more levers to pull for entrepreneurs, more levers to pull for all Singaporeans. Our decisive advantage is really the GLCs, and here I confine myself to the Temasek Holdings companies and not the NTUC companies, which really serve the domestic market. I want to talk something about the NTUC-linked companies a bit later on. Because only Temasek has the clout to anchor Singapore to the world beyond our shores. We have many entrepreneurs in Singapore. Some of them are sitting in this House. But for them to reach out beyond our shores is really one leap too far. Only Temasek can give us what I call the GNP effect - the GDP plus net foreign earnings. What for? To compensate for a slowing GDP which is almost inevitable, because of an aging population and a declining birth rate.

Madam, back to Hong Kong. The laissez-faire economy in Hong Kong has always been paraded as the utopia of entrepreneurs. Mr Leong proudly said that Hong Kong has 12 billionaires. Singapore has five billionaires. The fact is that they are richer than us. They have double our population notwithstanding. But whether they are entrepreneurs of the breed that inspire confidence and envy is quite different. I will quote an Economist article entitled "Face Value - Asia's superman swoops again". Basically, it is about Mr Li, but the opening paragraph is instructive. It is worth reading. It says:

"In all honesty [in typical Economist style] most of Asia's tycoons no matter how illustrious they appear at home are really keepers of glorified mom and pop shops. The exception is Mr Li Ka Shing." I will talk about Mr Li a bit later on.

So, how did they become billionaires? There are many reasons. The Economist went on to say:

"Among many reasons, they were developers who simply rode with land prices."

The reality in Hong Kong today is a noisy market place, crowded with thousands of entrepreneurs who are, in the final analysis, owners of SMEs and glorified sweat shops. They perform useful roles. Please do not get me wrong. They provide employment for the masses. They provide hope. But the world has changed.

In the economic food chain of the WTO, the new regime, it is a big fish eat small fish scenario. Hong Kong's cousins, their brethrens, from mainland China, are beginning to eat Hong Kong SMEs and sweat shop owners as fish feed.

The truth of the matter is this. In Hong Kong, a few tycoons and their gargantuan holding companies, like Cheung Kong and Hutchinson Whampoa, dominate the Hong Kong economy. People do not see that. Together, these companies and the tycoons employ hundreds of thousands of workers, and their decisions influence the destiny of Hong Kong and HongKongers. These tycoons own an eclectic group of businesses, sometimes totally unrelated. They are like the mini-government of Hong Kong. Some say the only government of Hong Kong. These tycoons own what? They own banks, the ports, power stations, telecommunications, the media, retail, yes, supermarkets and, of course, real estate. They are the economic equivalents of our Temasek-linked companies. But the similarities end here. They are powerful. They are rich. GLCs are rich, but GLCs are not powerful.

The Hong Kong tycoons and their companies are answerable to no one, but themselves, their shareholders and their boards of directors. But usually they have the biggest chunks of shares in their own companies. So they are basically answerable to shareholders of which they form a large part. And they are very profitable companies. The profits only accrue to the shareholders. In contrast, GLCs are not powerful.

Today, we are debating the role of Government-linked companies, Temasek-linked companies in this House. TLCs are answerable not only to shareholders, because some are listed, and their boards of directors but, of course, to Temasek Holdings, which has to answer to Government. That is why we are here today. And Government has to account to MPs who have to account to their constituencies. So, talk about transparency, talk about accountability, our GLCs, our TLCs in particular, are extremely accountable. Anybody can move a motion or file a Question. In my 10 years here, I have heard several questions and answers on why these TLCs went into this business, why this business failed, and the Minister for Finance dutifully stood up and gave an answer which, I think, most of us accept, while some disagree altogether.

I am using this example to drive home the first of many messages in the New World, in the new regime of WTO. And this first message I want to drive home is this - that TLCs are not villains. In a global economy, a few companies dominate. This happens in Singapore. It happens to be GLCs because of our history. It happens in Hong Kong. A few tycoon-dominated companies control and run Hong Kong. And the rest of us, SMEs, sweat shop owners, have to feed off these TLCs, tycoon-owned businesses. It is the same everywhere. Unfortunately, too many Singaporeans love to hate our Temasek-linked companies and now that has been extended to NTUC-linked companies. They blame TLCs for the death of local entrepreneurs. They say, dismantle the TLCs, and then everything will be fine. All entrepreneurs will mushroom. They will grow, they will flourish, and then they will be big. But I wish it were true and life is so simple.

Mr Leong Horn Kee and Mr Inderjit Singh, please take a look at Hong Kong and tell me, where are the Bill Gates? Tell me, where are the Jeff Bezos, where are the Dells, where are the Intels, where are the HPs? You do not find them. None. They are not there. The gatekeepers of Hong Kong are really small entrepreneurs. They are the unsung heroes of the economy, but the people underpinning them are just a few big tycoon-dominated companies.

You will not find a Bill Gates in Hong Kong, but you will find a Mr Li Ka Shing. Hongkongers love him, and they call him "Superman", chiu yan (in Cantonese). Chiu yan means Superman. Mr Li's hold on the economy is formidable. His two companies - Hutchinson Whampoa and Cheung Kong - dominate the economy of Hong Kong. But unlike some of our CEOs of GLCs, Mr Li is revered, respected and worshipped. Here, Singaporeans blame TLCs for being too big and crowding out businesses. But, think again, Mr Li is held up as a model entrepreneur in Hong Kong even as his eclectic empire grows. Some people are saying in Hong Kong that he is also crowding out entrepreneurs. But, by and large, this is a voice from the minority.

Mr Li is a hero in Hong Kong and not a villain. He provides jobs, thousands of jobs, for Hongkongers. And Hongkongers believe in Mr Li. In fact, Hong Kong is worried every now and then that he might just move his Hutchinson Whampoa and Cheung Kong offshore. Each time Hongkongers feel that he might be doing so, he came out to reassure them. But our TLCs have never said they want to move overseas. Our TLCs have said they want to go overseas to do business and bring the money back. The question of TLCs rooting themselves with the Singapore economy and providing jobs for Singapore has never been an issue here, which I am glad. The issue of Hutchinson Whampoa moving overseas has always been rumoured and always dispelled by Mr Li himself.

But Mr Li, although he is a superman, is not infallible. His company has made some less than good investments. Or even today, Hutchinson Whampoa's share has been hammered from the high. Before the year 2000, it was something like HK$120 per share. Today, it is something like HK$60. I do not know the rate today. But, last week, I saw it was hovering below HK$60.

In the 1980s, Mr Li's investment in a Canadian oil company did not live up to market expectations. It under-performed for many years. Mr Li's investment in Rabbit, if you remember, a telephony company in Britain, was another flop, a failure. But few remember his failed investments. We all remember his successes, and so it should be, because he is a very successful businessman.

This example brings me to a second message which I want to bring home - that Singaporeans should be a little bit more forgiving, if some of our TLCs have made some bad investments in the short term. Even a highly successful company, like Hutchinson Whampoa, has made bad investments. Singaporeans, in fact, should be worried if our TLCs make no investments and think short term.

There is a third point in my comparison, and this is not a major point I want to make, but I thought this is the mood of the day, and I would say it. Singaporeans are having so much angst over foreign talent policy. If TLCs were dismantled, for example, who do we sell to? Well, possibly sell them to some foreign investors maybe, who have the money and the interest. If so, there will be a lot more foreign talents in Singapore.

Both Hong Kong and China regard Mr Li as a patriot, but Mr Li did not grow his stable of companies by employing Chinese and Hongkongers for a long time. For as long as I can remember, Mr Li has always had a policy of hiring the best, and his most senior management are foreign talents, and foreign talents I mean Caucasians. In Hong Kong, they say kwai lao. Here, in Singapore, we have a few foreign talents in GLCs, TLCs, and already Singaporeans are feeling the heat. Actually, we should have more. Because if you want TLCs to be global companies of distinction, we really need to harvest the best from around the world. So I asked those people who are lobbying for the dismantling of TLCs, are you sure you want to dismantle TLCs? Because, you know, what they say, be careful of what you wish, you might just get it.

I hope I have put into perspective a world without TLCs. Still, I think it is right that Temasek Holdings is determined to sell some TLCs even if it wants to grow others, find partners for others and merge others. But we are reassured, through the Temasek Charter, and the statements in the press, that there will be no fire sale. We are not going to sell. We should not sell the TLCs for a song. Our national assets are not for lelong. And this brings me to my last point.

The management of Temasek Holdings has come up with a Temasek Charter. At the top of its Charter, it says, "Temasek Holdings holds and manages the Singapore Government's investments in companies for the long term benefit of Singapore." I find this most reassuring. How many companies can put up that kind of mission statement? The Temasek Charter makes it clear from the very outset that every Singaporean has a stake in Temasek even if we do not hold a single share in any of the Temasek-linked companies. I think we should be proud of Temasek. Temasek really is our future. Our SMEs, our small mom and pop shops do deserve encouragement. They should be encouraged to grow. We should level the playing field. But they are unable to reach out and anchor to the big powers, the big players in the West.

When we were young, we all know this refrain in essay. The teacher always says, "Singapore is a small island with limited resources." I think, today, we can tell the teacher to tell Singaporeans that "Singapore is a small island with Temasek". If Temasek is our future, we should chart its future together. And for this reason, I really welcome this debate on Temasek Charter in this House moved by Mr Leong Horn Kee and Mr Inderjit Singh. In some ways, I agree with them. For too long, Temasek has been a passive holding company. Its mode of operation and its mission were a little bit opaque, a little bit over our head. I hope that it is slowly changing. I think it is changing. And this new management is a catalyst for change.

I have a dream that one day Temasek will be a General Electric with a diversified stable of businesses, each of which is a world or, at least, a regional brand name. It will take Temasek decades to reach this goal. It took Jack Welch a good 20 to 30 years to finalise the shape of General Electric that we know today.

Certainly some companies should be divested; some merged; some acquired, but that is best left to the management of Temasek. But reading the Charter, I am confident that Temasek management has the ambitions and determination to succeed. With this Charter, Temasek is really chartering into uncharted waters, because there are no MBA case studies for Temasek to emulate and analyse. Temasek Holdings will have to write its own MBA case study, for somebody else to study in the decades to come. In time, we will know how Temasek has remained faithful to the Charter, how it has linked the future to Singapore, and how it has performed against its own benchmark. I think today's debate is useful. We should revisit this debate in the next few years.

But, Mdm Deputy Speaker, before I end, I hope I have time to talk about the NTUC-linked companies. Actually NTUC-linked companies are not part of today's Motion. NTUC-linked companies are largely formed for Singaporeans and, in fact, NTUC-linked companies - I know it, because I had been in NTUC for sometime now - were formed precisely against the Yellow Pages rule. The Yellow Pages rule says that if the name is in the Yellow Pages, let us, say, a supermarket, it should get out. But when FairPrice was formed, there were few supermarkets. NTUC FairPrice went in basically because the price of basic commodities was too high. And NTUC went in to provide competition against the local retailers. The results, after 20-odd years, I think, prove that it has succeeded. NTUC prices today are among the lowest prices in the retail scene. Not every item but, by and large, if you look at a typical basket of items, NTUC has the cheapest basket in town.

NTUC companies are not funded by Government. Government does not put money into NTUC. NTUC's seed capital comes from all of us. It is a cooperative, and the money comes from small timers like you and I who buy shares, $1 a share, over the last many years. I am not sure if we divest, let us say, FairPrice, we will quell the public discontent. If FairPrice were to be sold, sold to whom? That is the first issue. The second issue is the person who inherits FairPrice would want to make it even bigger, and he will crowd out even more local retailers. The presence of FairPrice in any new town is welcomed, I tell you, because it brings down the cost of living in that town. It has what we call the Wal-Mart effect. Every time a Wal-Mart opens up a big supermarket chain in some parts of America, the residents welcome it, because it lowers the cost of commodities by a huge margin. But, of course, shopkeepers around the town would be upset. It is something we have to live with. In Malaysia, they have found that by allowing big retail giants, like Carrefour, to operate, for example, retail shops went out of business. So unless you say that you want to limit the number of supermarket outlets, it is not going to help even if FairPrice were divested from the NTUC family.

One last word about academic advice. I have left the university for the last 10 years now, and of course not as well known as Michael Porter and all that. Listen to their advice, they have a lot to offer us, but please listen with a pinch of salt. Many renowned academics over the years, when you look back at their advice, their advice sounded foolish.

In the early years of independence, in the 60s, the advice of the renowned academics around the world to all developing countries was to close your doors, be self-sufficient, do what is best for you. So many countries, like India, Malaysia, African countries, closed their doors. Singapore went against the advice of these eminent economists. We opened up, we linked up to the world, we succeeded. Because we went against the advice of the day, we succeeded. I am not saying that we should go against the advice of these renowned academics. But think again. We are here, we know our business better. We are here because our destiny is here. They are in Boston, they are in London. Their business is to write papers, to gain a world-wide audience, to win the Nobel Prize. Our duty is to provide for our future, for our children's future.

Mdm Halimah Yacob: Madam, I wish to thank you for giving me the opportunity to participate in this debate. And in fact, I would also like to thank the movers of the Motion, my parliamentary colleagues, Mr Leong Horn Kee and Mr Inderjit Singh, for tabling this Motion. In doing so, I think they have provided this House with a great opportunity to debate on a topic which is obviously of great interest to Singaporeans and which is also important for our future growth and development.

Indeed, I have listened very carefully to the comments and viewpoints made by the speakers before me on this issue. Generally, I do not disagree that we must help our local enterprises to develop and grow. And to this end, we should examine existing schemes, policies and regulations to determine whether there are any impediments standing in the way of full participation by our SMEs, of which we place them at an unfair disadvantage compared to GLCs and MNCs. In this respect, the recommendations of the EISC should be seriously looked at and the Government should seriously consider implementing useful and practical suggestions that will strengthen our economy and make Singapore even more competitive globally.

I am all for a level playing field. But I believe that we should not have protectionist policies, not only for GLCs and MNCs, but also for our own SMEs. As such, protectionism will not, in the long term, help our domestic industries to be resilient and to compete globally.

Madam, having listened to this debate, I am not sure whether we are identifying the issues correctly. There is a tendency to compartmentalise GLCs and SMEs into different boxes and to assume that one can only grow at the expense of the other. To me, the issue is not whether GLCs should be competing with SMEs. But of greater significance is the issue of how Singapore companies, whether they are GLCs or SMEs, can compete in a very competitive world economy which has become even more aggressive with the admission of China into the WTO.

Recently, with my colleague, Mr Nithiah Nandan, we led the SLF model workers delegation to Shanghai and we visited the Philips optical storage factory there. The plant's General Manager, who briefed us, told us that the operating environment in China is very flexible and fast, and there is good support from the authorities. The factory was sited on a huge piece of land and the huge factory took only one year to build with the workers working round the clock come rain or shine. He said that in Europe, it would have taken two to two-and-a-half years to build a similar factory. The education system, according to him, is good and among the non-production staff, almost 90% are degree holders. And of these, 15% are PhDs. Among the production staff, the average level of education is at least upper secondary education.

The point I wish to make is that, instead of debating about how GLCs are crowding out local companies and to add to that, I must add NLCs, a new term that has just been developed today, perhaps we should concentrate more on how GLCs, NLCs and SMEs can partner each other as one united force to compete in the international market and to be more efficient and productive domestically.

From the workers' viewpoint, what is important is not so much whether companies operating in Singapore are GLCs, SMEs, or foreign-owned. Rather, of greater significance to us is whether such companies create jobs, incomes and bring in new technologies and skills, in other words, whether more jobs are created through such investments and whether these are well-paid jobs.

Madam, it is a fact that, overall, GLCs and MNCs provide greater job stability to our workers and offer more attractive terms of employment. This is because they are generally bigger, have more resources and are more professionally run. In my view, promoting GLCs need not be at the expense of SMEs. In fact, there is no guarantee that pulling our GLCs from certain sectors would automatically result in a mushrooming of more and stronger SMEs. What may happen, instead, is that the vacuum would be very quickly filled up by bigger, more competitive and globally-savvy foreign competitors.

This is evident by looking at the retail sector. In Thailand, for instance, the competition comes not from the State-owned enterprises but big foreign retailers, such as Carrefour and Taxco. There are local companies, but they are weak and not competitive. In Taiwan, the supermarket scene is all foreign, with Carrefour being the biggest.

Madam, let me come to another point which has been raised by previous speakers. I think it is unfair and unwise to brush the NTUC companies in the same stroke as other private enterprises. In the first place, NTUC companies are, in fact, cooperatives set up by the workers. The capital for each and every one of our cooperatives comes from shareholders which are our trade unions and individual members. Hence, these cooperatives belong to the unions and workers, and not the Government. We do not receive Government funding or capital to set up any one of our cooperatives. The priority of NTUC cooperatives must be the ordinary consumers, and the 400,000 or so Singaporeans, many of whom are low income workers, who collectively own the cooperatives. How many of our workers could afford to invest in companies and hold shares on the same basis as their management counterparts, or better-off Singaporeans?

NTUC cooperatives will be measured by whether they have helped to make a difference to the lives of ordinary Singaporeans. Our responsibility is to help workers stretch their hard-earned dollar and improve their quality of life.

Madam, in fact, our NTUC cooperatives too face intense competition from major foreign retail chains many times their size. It also has to contend with business alliances by private sector players. Since the 1980s, for instance, FairPrice had to tender for sites in open competition. In new suburban malls, FairPrice would not get a chance to even put in competitive bids, as some developers prefer to award the tender to supermarket operators with whom they had special relationships. Residents, as Prof. Koo Tsai Kee has said earlier on, have complained to their MPs when they do not have an NTUC FairPrice outlet near their home. This is clearly evident that people, ordinary Singaporeans, average workers, support the idea of cooperatives and find them useful and meet their needs.

Madam, it is true that NTUC appoints some Government Ministers, Members of Parliament and Government officers on the board of directors of our cooperatives. But this is to enable our cooperatives to benefit from the experience and expertise and, not as implied, to gain any undue or unfair advantage compared to other businesses. In fact, NTUC also appoints prominent businessmen on the board of NTUC cooperatives and many have, to their credit, willingly served on our boards which have benefited not only the NTUC cooperatives but, in many ways, have contributed towards a conducive industrial relations climate, as such co-option of business leaders has provided the opportunity for business and union leaders to integrate and understand each other's position better. The fact that many prominent businessmen agree to serve on our boards indicates that they too subscribe to the social objectives of NTUC cooperatives and want to contribute towards this larger community objective.

Madam, NTUC cooperatives are truly mass movements and we play a social role by providing real and tangible benefits to Singaporeans. During good times, the NTUC cooperatives moderate cost increases by setting benchmark prices. And during bad times, they help workers tide over the difficulties, such as the 1998, 2001 and 2002 relief packages. In fact, they collectively provided $26 million in relief package in 1998 and $52 million in relief package in 2001 and 2002. NTUC cooperatives are not set up for profits alone although, in order to stay viable, they have to be profitable so that they can continue to contribute to society. Wherever possible, NTUC cooperatives also strive for win-win strategies by working with small businesses to help them grow. For example, FairPrice and Healthcare work closely with small retailers through their franchise schemes.

Madam, recently, the cooperatives, such as FairPrice, Foodfare, Healthcare and Childcare, have also announced their commitment to help cushion the impact of the GST increase on Singaporeans next year. Since 1999, we have been publishing a set of social indicators together with our statement of accounts. This is an example of the transparency requirement, which was mentioned by Mr Inderjit Singh earlier on. Just as companies account to shareholders each year, in terms of equity, we publish social indicators to show that we are not just businesses, but that we believe in social responsibility and will do our part to help improve workers' lives and ensure that their basic needs are met. Although our cooperatives belong to the workers and unions, shareholders do not profit from our cooperatives. In fact, under the Cooperative Societies Act, the maximum rate of dividends that cooperatives can pay is capped at 10%. This means that whatever benefit is reaped by the cooperatives, these are largely ploughed back to consumers and society.

Madam, I am proud to be associated with socially responsible employers who care not just for their bottomline, but also enlarge their role to care for the community. Cooperatives can serve as a check against the excesses or failures of the market. They are bound by their admission, values and traditions to consider the wider interests of society. Each and every cooperative that the labour movement has set up is founded upon a clear social objective. For example, NTUC Income was set up in those days because there is no insurance company that is prepared to provide low cost, low premium insurance coverage for workers. NTUC FairPrice was set up in those days because there was rampant inflation and profiteering, and that was eating into the hard earned cash and money of the workers. The presence of our cooperative movement has contributed towards social stability. It has helped to mitigate the effects of a widening wage gap as it helps to level up workers.

Madam, NTUC empathises with the problems faced by small retailers. Without sufficient economies of scale, they will find it difficult to operate. However, it is unfair to place the poor prospects of small neighbourhood retail shops on the growth of NTUC cooperatives. In the absence of NTUC cooperatives, small retailers would face the same competition by other big retailers, including the foreign ones. Of the supermarkets, only Sheng Siong and PRIME are owned by Singaporeans. The rest are foreign owned. We do not think that dismantling NTUC cooperatives would improve the position of SMEs, or that it would promote greater innovation and entrepreneurship among local companies. There are clearly many other factors that are at play, such as access to capital expertise and size which affect the growth of our local companies and not because of the presence of NTUC cooperatives or NLCs.

Mdm Deputy Speaker, someone has suggested that some of our cooperatives are too small and have little impact. In this case, is the answer not to grow bigger, to develop the clout? But if we do so, then we will be accused of crowding out the local companies. Even so, a small player, such as Denticare, exerts an influence. Denticare executives have been asked from time to time to raise their prices so that other dentists can follow suit. Does Denticare crowd out other dentists? It cannot be so, as the people in Denticare are themselves dentists. If other dentists wish to compete with Denticare, they are free to grow together and offer the public prices lower than the table of rates set by the Singapore Dental Association. There is nothing to stop them. And the public would applaud them, and so would I. Perhaps, I would also go and visit them, when I need dental treatment.

Mdm Deputy Speaker, in conclusion, I agree with the Motion that we should examine all ways to ensure that our local SMEs stand a chance and can benefit from Singapore's economic growth. I do not think that the debate should be about either promoting GLCs or SMEs, but rather on how both can partner each other and compete in the global economy. Both have a role to play, and they can certainly complement each other in order to promote and strengthen the Singapore brand. Most certainly, NTUC cooperatives will and must continue to play the role of a social leveller and guardian of the interests of the vast majority of Singaporeans who have benefited from our presence in the market.

Mdm Ho Geok Choo: Mdm Deputy Speaker, the EISC Report and the New Temasek Charter are fundamentally sound. The recommendations in the Report and the express intention to wean off companies by Temasek Holdings augur well for our nation's transition from an investment-driven phase to an innovation-driven phase in our economic development.

The call by many is that this is the time when the Government is to take a back seat and allow companies to take an active role in shaping the business environment and lead development through innovation and creativity.

The Government will lead the way in divesting non-core businesses, partner SMEs, form alliances, merge with or acquire stakes in both local and international interests. All these are happening in a difficult global market environment.

An array of different strategies and conditions must now prevail in order that Singaporean companies could rise to the new challenge. For example, local demand and a challenging marketplace must develop as a source of new ideas for product and service innovations. Other imperatives include companies rethinking their traditional assumptions, management techniques, business leaders redefining their roles and their initiative in moving into new territories.

Madam, Singapore boasts an excellent track record in rising to challenges. The Government has already taken several measures to equip Singapore in this transition. The issues are how soon and are our companies ready? To what extent is our infrastructure ready or accessible to the SMEs in terms of loans, funds and network? Are GLCs totally irrelevant in this new economic era? Why should we still be holding on to some of them? What flexible model can we initiate as strategies that will continue to anchor our flagships?

Madam, we have built the Singapore economy into what it is today, largely through local talents and by constantly growing and strengthening our key economic institutions such as the GLCs. GLCs and the assiduous cultivation of our local talents for public service and, in recent years for the private sector, have been the cornerstones of our economic growth. We should not be too hasty in wanting to do away with what has worked well for us and to adopt some other strategies which may sound fashionable but have not stood the test of time.

According to the World Bank, more than US$700 billion in assets have been privatised around the world in the last decade, most of which occurred in what economists call "emerging economies". There is a definite trend around the world towards privatisation of government-linked companies or what, in some circles, is called state-owned enterprises.

The rationale for the privatisation of these enterprises are many and varied. Some of them may be relevant to the GLC situation in Singapore, others not. Before we join in the rush to divest some of our prized-assets, it is important for us to understand some of those reasons that lead some countries to undertake privatisation of their GLCs. This will avoid a doctrinaire approach to this issue of privatisation. One of those reasons has to do with agency theory. This says that because GLCs belong to society as a whole, it is an agent without a real principal. As a result, the performance of these GLCs is sub-optimal because they have rather vague goals, as opposed to the profit-maximising goals of privately-run outfits, like the MNCs.

Fortunately for Singapore, our GLCs are run on an arms-length principle, in that the Government does not directly interfere with the daily operations of these companies. In actual fact, they are run on purely commercial lines. There are instances where the Government may have invested money into these GLCs for long-term strategic reasons without seeing an immediate prospect of making quick returns. However, this does not mean that Government ownership of these GLCs is not commercially-sound. It just means that there are instances where the market fails to identify long-term opportunities which Singapore is well placed to exploit.

Another reason why privatisation has been the order of the day in many countries is because these enterprises have not been competitive enough to take on world-class competitors in an era of trade and investment liberalisation. Is this situation symptomatic of Singapore's GLCs? Some GLCs may need to be partially or even completely privatised so that they can attract foreign technology transfers, managerial expertise, and capital. The latter will also help boost our efforts to enlarge the capital base of our stock exchange and the increase of foreign portfolio investment in Singapore. However, there are GLCs with substantial Government ownership which are doing quite well already on their own. Brand names like SIA, DBS and PSA Corporation spring quickly to mind in this regard.

To further divest Government's holdings in these companies may not necessarily improve the competitive advantage of these enterprises. If the Government were to relinquish more control of these enterprises, what compelling rationale is there to guarantee that they will be a better run outfit than what is already the case? SIA has consistently been one of the most profitable airlines in the world. PSA Corporation is likewise one of the most profitable port operators in the world and has sustained Singapore as the second largest port worldwide in terms of shipping tonnage. We should endeavour to create more PSA Corps and SIAs out of the more promising GLCs, instead of contemplating to hand over control of these companies to foreign interests or appoint foreign proxies to run them for us.

Because we are small and vulnerable, human capital is our most precious asset, and we must continue to build up our own core of national talent to be in ultimate charge of our key resources and institutions. We cannot depend on nor expect foreign managers and investors to take ultimate control of our key economic institutions and expect them to make a living for us. That will be the end of Singapore as a sovereign nation.

Still yet another reason why some countries join the privatisation mania is because they are faced with balance-of-payments or fiscal crises that compel their governments to sell off state-owned enterprises in order to raise money to cover shortfalls in other areas. Surely, this is not the case in Singapore, as we all know how prudent our Government has been in the stewardship of our nation's reserves.

This is not to say that we should not open up our market and companies to foreign investors and expertise. To remain competitive, we must continue to attract the best management and business talents to Singapore to supplement our national talent and, if possible, absorb them into our citizenry to enlarge our core national talent pool. We can enlarge our domestic talent pool by making Singapore a global metropolis attractive enough for foreigners to want to live and contribute to Singapore's prosperity.

Giving up ownership and control of our key home-grown industries that are strategic to our prosperity and survival as a nation is like cutting off a healthy limb from a healthy body. Is it then necessary or wise for the Government to privatise substantially or completely all its GLCs? Proponents for the divestment of our GLCs argue that GLCs present unfair competition for both local and international players, given the Singapore Government's backing in these companies. For this reason and the perceived sensitivity that this may pose to the national security of other countries, it is argued that the GLCs will not be welcomed in the international market place. Similarly, because the profit objective of our GLCs may be compromised by Government's social and political imperatives, they will be shunned by international funds and investors.

Last but not least, there is also a perception that because they are GLCs per se, there is a lack of will on the part of the Government to ensure that the best possible management is in place. But the catch here is that those arguments are mostly propagated by our competitors and by pundits who make a living from espousing trendy and esoteric management theories. How, for example, could any of our GLCs be seriously considered to be competing at an unfair advantage in terms of financial muscle in the international marketplace merely because the Government has the controlling interest, when not even one of our GLCs can be found on the Fortune 500 Global List?

While our GLCs should be competitive and profitable world-class players, it is also a legitimate objective to ensure that profit maximisation is not at the expense of national interest. GLCs should not only generate financial gains for their shareholders, but they should also serve our national interests in contributing to the peace, prosperity and security of Singapore. Moreover, our GLCs are subject to the same rules that apply to others in the international free marketplace. Instead of being defensive about Government involvement, our GLCs should robustly rebut unfounded criticism from vested interests and stake their claims strongly as legitimate participants in today's increasingly globalised marketplace.

Madam, PSA Corporation and SIA have become world-class companies in their own right, consistently outperforming many privately-controlled and managed ports and airlines of international stature. The Government need not be apologetic about their achievements and contributions to Singapore. All businesses, without exception, are subject to the fluctuations of business cycles and world economic upturns and downturns. So, for example, if SIA is not making a profit for the first time after decades of sterling performance, this should not be the reason for it, or a sizeable chunk of its equity, to be handed over on a silver platter to some seemingly savvy international fund manager. What assurance can we have that they can perform better than SIA? By all means divest ourselves of all long-standing non-performing GLCs or even close them down. But for those that perform or are strategic to our national interests, such as in defence, it makes little sense for us to throw out the baby with the bath water.

The recent announcement of the PSA Corporation model of opening up berths to foreign and private operators to manage on their own shows a savvy customer service response. The open invitation by PSA Corporation to shipping companies to participate in port management and operations is a clear signal of its open and flexible approach in striking up new alliances.

Let us examine some of our assumptions underlying the intention to divest before proceeding to do so. To what extent must Government sell off its holdings before investors are sufficiently assuaged that these enterprises are really bottom-line concerns?

Another related issue that ought to be raised is that the manner in which privatisation is carried out is just as important as the rationale for divestment. Firstly, if we decide on privatising some of our non-core, non-strategic assets, we should do so gradually, and not go for a quick sell-off, especially in times like ours when the market is still soft. To do a quick sell-off under today's market condition is unwise for obvious reasons. If we decide to let go of some of these assets, we should do so in a staggered manner, selling off tranches at those points in time when the market is on the upturn. Studies in other countries show that by gradually releasing its holdings over time, the long-run revenue resulting from the sale of these shares will be maximised. This is because, as investors gain confidence in the privatisation programme, the value of these shares will tend to rise. This, in turn, will benefit all Singaporeans.

Secondly, I feel that instead of selling large chunks of these holdings to foreign investors, we should sell them to large groups of small, dispersed investors. SIA and SingTel are good cases in point. In this connection, the rule for the disclosure of any take-over bids by powerful investors and fund-managers should remain, and not be diluted further by a further reduction in the need for the disclosure of any take-over attempt. Alternatively, we can consider selling off these holdings to the management of these firms if they are able to raise sufficient funds to buy the shares on offer. This will help increase the sense of ownership among these managers, and it will also help to retain critical managerial know-how in these firms and give our managers a chance at injecting the entrepreneurial spirit in these firms. The Ang Kong Hua-led proposal to buy NatSteel is a case in point.

As far as the GLCs are concerned, the Government's policy of divesting them to the private sector when they no longer serve a useful strategic thrust to the economy is a correct one. And, should the Government continue to play a lead role in identifying strategic sectors for Singapore?

There are two fundamental forces at work here. One is that the Government should devolve itself from running state enterprises. The other is that the Government should take the lead in identifying key sectors that will do well in the future.

Which of these two do we want? Are we sure that the Government can always be spot-on to identify areas of growth in so prescient a fashion as was the case in the past?

The proposal to consider other ways of involving the private sector is a good one provided that we involve the private sector in a continual process of sectoral growth-identification.

Madam, the Report's recommendation on having a generic law on anti-competition is good. It is to prevent collusion, anti-competition and the like. In other words, in so far as it pertains to the encouragement of entrepreneurship and competition among Singapore companies, it is truly commendable.

I can envisage potential instances where MNCs or even subsidiaries within MNCs collude to keep price high or merge among themselves to corner a large segment of the international market. Do we seriously want to keep them out of Singapore because they indulge in such practices? What if Singapore companies collude among themselves to corner a slice of the foreign market? Indeed, the proposed law can prevent such instances from occurring.

Madam, another dimension which has been mentioned by my colleagues is the role of statutory boards and their effects on competition in Singapore. To reiterate, if the function of statutory boards in Singapore is to help provide an institutional environment where private businesses can compete on a transparent and level-playing field, then it stands to reason that these boards ought not to be involved in the competition themselves or else they will lose their standing as impartial guarantors of a free and fair regime in the various sectors they are supposed to be responsible for.

Many today are questioning the commercial aspirations of spin-offs of statutory boards. Two better known ones in the manpower industry are the Civil Service College and the PSB Corp. Consultants and training providers are asking why these two entities are vying for the same commercial pie. They are providing similar management training and consultancy programmes to a near saturated market.

Madam, this runs against the original function of the statutory boards, thereby detracting from what they are supposed to do. Do these spin-offs function to facilitate and enable the private operators in enhancing the cluster of related and supporting sectors? If their objectives are contrary to one of the key thrusts in transitioning into the innovation-driven economy, then we ought to hold the brakes and urge a review of their directions.

This is to avoid the Government from being alluded in competing in an unfair manner when it enters certain sectors of the local market that should be best served by the private sector. Perhaps, a charter similar to the New Temasek Charter should be considered for statutory boards with spun-off commercial set-ups. This is to better scope their functions and ensure that if at all for any useful contribution, they serve to enhance the cluster and related supporting industries.

Madam, on this note, I would like to support the recommendations of the EISC to promote private enterprise in Singapore.

Mr Sin Boon Ann: Mdm Deputy Speaker, I support the Motion.

The EISC proposals and the Temasek press release are timely and welcomed by many Singaporeans. GLCs have been a subject of much debate and controversy for sometime now. Among the many issues that have surfaced, there are two that have generated much attention; first, the question of competition that the GLCs provide to local non-GLC enterprises and, secondly, and one which is related to the first, the role and management of the GLCs.

I have, in this House, consistently maintained the view that GLCs, if they are worth their salt, should play an active role in helping Singapore develop a strong external economy. A well-established network of successful investments and strategic acquisitions outside Singapore, particularly in areas where GLCs are able to leverage on for the purpose of technology transfer, would help provide the platform for local industries to grow and for local employment to be generated. I agree that GLCs venturing overseas could well partner local enterprises to help them expand beyond local shores. Similarly, where we are able to develop our external wing successfully, we can afford a little inefficiency in our domestic economy without having to worry too much about external competition. Our local workers, for instance, can, through some tax incentives or otherwise, or even indirect subsidies, continue to work in areas traditionally occupied by foreign workers without having to earn their kind of salaries.

Madam, we are a small country and our resources are limited. We need to harness every resource we have to ensure our long-term survival. The GLCs, because of their larger capital resource, depth and breadth of experience in various businesses and better command of human talents, are best positioned to lead the charge for Singapore into the world economy. The EISC report and the proposed Charter by Temasek have both taken a step in the right direction when it recognised that increasing focus must be placed on divesting non-key assets and placing our bets on strategic investments overseas. I do not think that anyone in this House will take exception to the stated intention contained in the documents.

However, while no one would quarrel with the clarion call to divest and venture overseas, the devil, as they say, is in the details. There are issues and, hopefully, some of these issues will be dealt with in the course of this debate.

First, as with the others, the GLCs. Mdm Deputy Speaker, we all know that GLCs here serve the specific purpose of not only providing the appropriate vehicle that allows Government to invest the public funds. It also, and more importantly, serves as tools that allow us to take the economy into strategic areas that are of vital economic interest to Singapore. It is no surprise therefore that the main protagonists in financial services, infrastructure and industrial development, utility services are GLCs. GLCs that are engaged in businesses are therefore not only driven by the necessity to ensure that they are not insolvent, but also to ensure that the overall needs of the country are met at the same time; which raises the question of whether GLCs ought to be treated strictly as private sector companies, to be left to shareholders to decide, or be treated as hybrid companies which, because of the public interest that they serve, not only owe a duty to the shareholders, but also a duty of accountability to the wider public.

Our Government has in the past consistently maintained that the strict line of accountability of the GLCs should be to the shareholders as these are private sector bodies and Parliament is not the appropriate body to undertake any oversight function. Madam, the time has now come perhaps when we should review the stand taken. Over the years, and much to their credit, the GLCs have successfully transformed our economy and helped build up Singapore, as we know it today. It is for this reason that your typical GLC is not just your mom-and-pop neighbourbood shop but huge conglomerates with interests that span from healthcare and telecommunications to utilities and aviation. These are companies that command very substantial capital resources, a large part of which is the taxpayers' money; your money and my money. These are also companies that have intruded into our lives via the services that they provide; that any adjustment to the rates that they levy, whether it be hospital charges or bank charges, will affect a very wide segment of Singaporeans. Should they therefore be in the private domain or the public domain? Should their concerns be matters which should be left entirely to the shareholders or the wider public?

Mdm Deputy Speaker, our investments for the moment are safely watched over by Cabinet leaders or ex-Cabinet leaders through Temasek and GIC. We have no doubt that the present leaders are exercising their watchdog function effectively. However, one would say that the present safeguard also depends very much on the honesty, integrity and, to a large extent, the trust which the present leadership enjoys. On the other hand, one would argue that there is very little by way of institutional safeguard, which could serve as a check against abuses and excesses. The question is: who watches over the watchdog? At the moment, the public does not have complete access to the accounts of some Government investment companies; neither does the public have any knowledge of the web of companies that the GLCs control.

Mdm Deputy Speaker, while I can understand the need for confidentiality, the absence of an appropriate institution for independent accountability is not acceptable either. Our entire parliamentary system is dedicated to the proposition of accountability of the Government to the people. If public and open accountability is neither feasible nor practical for a variety of reasons, I would strongly suggest and urge the Government to consider setting up a council made up of prominent Singaporeans and parliamentarians to perform the task.

The council may be charged by Parliament to perform the task of providing additional comfort to the public so that the business of Government in the private sector is prudently managed to the highest standards. The function of such a council would be no different from the Public Accounts Committee or the Audit Committee in the context of a listed company. Additionally, if the Government represents the interests of the taxpayers through indirect holdings in these companies, it should be prepared to engage in more Parliamentary debates, as it has done in the past, on some key policies taken by the GLCs.

One would suppose that ultimately, the overriding principle should be greater openness on the part of Government as far as possible. With openness, there would be greater accountability, and with greater accountability, one would minimise the possibility of abuse by those on whose shoulders rest the responsibility of being the trustees of the people's assets.

Next, performance measures of GLCs and its Board. Currently, the performance of GLCs is partly measured by Economic Value-Add (EVAs). In its application, EVAs seek to determine, as I understand it, the value-add of the enterprise business activities in relation to the capital employed. This yardstick as a measure of the company provides the spurs for these GLCs to perform. However, while the use of EVAs may be well-meaning, the application could perhaps be refined further. At the moment, EVAs do not make any distinction as to whether the value-add to the companies came from domestic business or foreign business. What is important in the final analysis is that EVA is a reflection based on the sum total revenue of the enterprise. As a result, the application is not satisfactory in its present form. GLCs, desperate to perform to improve its performance, may well be forced to unfairly compete head-on with the small and medium enterprises for business or even to acquire them; a complaint that is commonly heard. It is no wonder therefore that the roast meat business was on the menu for GLCs some years back.

If we accept the broad principle that GLCs should concentrate and focus their energies overseas, while leaving the domestic economy to be substantially handled by the small and medium enterprises, it would make more sense if the performance index of GLCs be tweaked to take into account successful investments overseas. And to refine this further, we could base the determination of the EVAs of the respective GLCs on industries that these GLCs belong to. For instance, it does not make sense if SingTel were to go overseas to become the best food court operator. It does not work that way.

This brings us to the next point and that is, measuring the performance of the board of GLCs. Under the current proposal, the Corporate Governance Code will be fully implemented in 2003 by the listed companies. Non-listed companies will be encouraged to adopt the same. Under the Code, the Board is expected to set up functional committees such as the Nomination Committee and the Remuneration Committees to determine the nomination and compensation of directors, among other things. The recent disclosure of generous pay-outs to both executive directors and directors of a union linked transportation company has put the spotlight on the issue. On what criteria should directors be appointed and remunerated? Should directors of GLCs be allowed to give themselves generous pay-outs, including stock options? Do Government appointed directors to GLCs operate under any directive or remuneration and standards, and if so, what formula is this based? Should executive directors or Chief Executive Officers of GLCs that are non-performing be asked to go?

I have, in my previous speeches, said that the boards of GLCs must and should never be a place where retired civil servants and politicians fade away. Every director who is appointed to the boards of these companies must be able to hold their own appointment to these boards. They must be effective contributors to the business of the company and not just coast along. While Temasek is set about bringing out a charter that will guide its business, it will also be helpful if Temasek could also publish its guidelines on the appointment and remuneration of their directors as well.

Mdm Deputy Speaker, our Government has always lamented the fact that there is a dearth of talents for the appointment to the boards. It seems that every time an appointment is considered, the usual list of suspects is taken out and reviewed. It does not seem as if all Government appointed directors have limited tenure of appointment or are replaced by other younger and equally capable persons who may well be qualified to do the job. If the policy on Permanent Secretaries is to limit their term of office, the Government should perhaps consider such a similar policy in respect of appointment of GLC directors. Similarly, when executive appointments have been extended to foreigners, although many, I understand, are presently resigning as fast as they are appointed, GLCs should perhaps, in their internationalisation efforts, consider appointing more experienced foreigners to their boards, or to an international advisory panel set up for the purpose of advising the board. Such a policy, Madam, would give the Government the benefit of adding breadth and depth to the experience and expertise of the boards of GLCs. And I am sure such appointments do not cause as much rift and resentment in our society as the appointment of foreigners to executive offices of our GLCs.

Next, divestment of GLCs. The Temasek Charter, as we note, sets out the basic principle that our Government intends to divest investments that are non-core business, in the sense that I understand it, it does not have international growth potential. Such a move is welcomed as it dovetails into the broader plan of successfully creating an external wing for our economy.

However, in as much as the intention is easy to spell out, the role to implementing it is not. First, we are not told how businesses are going to be classified into whether or not they have international growth potential. Let me take a simple example of a fish-ball business. I believe that Temasek has already expressed the view that if it is the business of fish ball soup, then they are not interested. One would immediately recognise the practical difficulty of going through such a classification exercise. While the person selling fish ball soup may not, at first glance, seem like a hot candidate for a world-class business, who is to say the fish ball seller does not have the potential if his fish balls are the best in the world, and that he could potentially be a world-class supplier of fish balls and related products. Maybe fish balls are too remote an example.

To use a more familiar example, Breadtalk. One would have to admit that, at first blush, it does not seem likely that a bakery is in a position to put itself in a list of companies that Singapore can hold out to the world as successful examples of entrepreneurship. Yet, Breadtalk, and Dr George Quek in particular, is able to overcome the initial prejudices and is in the process of developing a brand name that is not only recognised locally but in the region itself. And to its credit, it has just won an SME award recently as being a well-known brand name in Singapore.

Madam, who is to say that Breadtalk does not have the potential to grow its business internationally? Would McDonald's not qualify as an international brand name? If GLCs were to a priori classify business with potential, it would be in no different position of possibly throwing the baby out with the bath water. I am concerned that by openly expressing their preference for certain types of businesses, the officers of the GLCs at the lower level may have inadvertently turned a blind eye to some businesses with very good overseas potential, and this may have the negative effect of stifling the entrepreneurship potential or initiative.

Turning to a more serious issue, I note that the Government is intent on selling or divesting of business that does not fit into its present overall game plan. I am grateful to learn from Prof. Koo earlier that the Government, in its desire to divest, is not about to do a fire sale of its assets. This certainly would not be in our interest. We must remember that some of these non-core assets are precious jewels no less in our collection, even if they are up for sale. There are several methods of disposing and valuing assets. I shall not delay our colleagues here with the different techniques, save to say that in any sale and purchase situation, valuation of assets on a willing buyer and willing seller basis is never easy.

I shall just name one example. The subject of management buy-outs featured very prominently recently when Temasek decided to put NatSteel up for sale. In an MBO situation, what is clear is that the information flow between the management and the shareholder is never symmetrical; in other words, it is asymmetrical. What it means is that the knowledge of the value of the company is not shared equally between the shareholder and the managers. Logically, it can never be, as who, other than the managers who are engaged in the day-to-day running of the company, are better acquainted with the business and the value of the company. In an MBO, any price that the managers put to the shareholders will always result in a net gain for them. It can never be that, in the case where the company is on the whole generally profitable, the managers are prepared to risk more than $300 million of their own money on a gamble. In the present context, it is arguable that risk money is directly proportional to the returns and inversely proportional to the risk that they assume. The question then is, if the managers are going to make money from the exercise, how much will it be? At best, the potential value of the company can only be an estimate. Of course, it has been said that tenders were called for and the proposals of the various interested were evaluated. However, it should be noted that price fixing in buying and selling is almost as much of an art as it is a science. What parties would typically do in order to ascertain the value of the company is to conduct a due diligence exercise on the company to verify the accounts and the corporate books. Again, anyone who has undertaken work in the area of mergers and acquisitions will readily tell you that no amount of due diligence is going to put an outside party on par with the managers in knowing and understanding the true value of the company. So, the point is while a tender may be called for, it will not always result in the seller ascertaining the correct value of the company.

There is therefore a general perception that the sale of Government assets, in this case, if it went to the managers, is going to make some Singaporeans very rich. The greatest travesty on enterprise and entrepreneurship will come if the managers are able to asset strip the company for a handsome profit after they have acquired it from the Government. The question then is in selling State assets to the managers, can the Government provide the assurance that these buyers will continue with the business and give comfort to the employees that their jobs will be secure; that the buyers will not asset strip the company; that if asset stripping was the intention, a better way to do it would be for the Government to do it itself; that the sale to the managers is the best way to maximise the value of these assets?

In the final analysis, while the Government is intent on divesting non-core assets, it should not do so in a hurry and, in the process, run the risk of selling these assets on the cheap.

My final point is on the small and medium enterprises in Singapore. The complaint that one often hears within some circles, and was referred to in this afternoon's debate, is that the presence of GLCs stifles much of the ability of the SMEs to compete and grow their businesses. While there may be some merits to the argument, one must not forget the converse side to the argument, ie, the entry of the GLCs to their business turfs has helped to raise the standard and quality of the business services. Think of what the quality of motor workshops would be like today if a GLC had not entered into the same arena. Small and medium enterprises should not think that it is their God given right not to expect competition from the bigger boys. In this debate, I believe the issue is not whether GLCs should enter into the business of small and medium enterprises. For, if this was the case, the absence of GLCs is not going to prevent other bigger boys from entering the scene. The issue is whether the bigger boys, and in this case the GLCs, are able to dominate the business of the small and medium enterprise simply because of unfair competition. Are the rules and the practices of the market place stacked in favour of the GLCs? Here, I welcome the proposal of the EISC that there should be some form of competition law to ensure that the playing field is a level one, irrespective of whether you are a big or a small player. The point is that the small and medium enterprises should not expect free rides from any quarters. They must earn their spurs by competing in the market place and survive. Only then can they hope to nurture any aspiration of competing on a bigger world stage.

Mr Ong Kian Min (Tampines): Mdm Deputy Speaker, the effectiveness of Government-linked companies (GLCs) and Government agencies in driving the economic development of Singapore since independence is undeniable. A report by the US Embassy in Singapore recognised Singapore GLCs to be well run, efficient and profitable, unlike typical state-owned enterprises in many other countries. It also acknowledged that the major GLCs, including Singapore Airlines, Neptune Orient Lines, Chartered Semiconductor, Keppel Corporation and Sembawang Corporation are publicly listed and among the best known corporate names locally and regionally.

Indeed, we should be proud of our GLCs and Government agencies which contributed about 13% and 9% respectively to our Gross Domestic Product in 1998. However, the very success of the GLCs and Government enterprises has reached a point where private enterprises feel crowded out of local businesses and has sparked calls for a refocus of the role of Government in business.

An open and competitive economy like Singapore will need to have rules to curb excessive economic power being concentrated in and wielded by any particular group, thereby resulting in inequitable conditions and stifling of competition and choice. A spread of economic clout is necessary to ensure a balanced, healthy and sustained growth of the economy. It is thus timely that the Entrepreneurship and Internationalisation Sub-Committee (EISC) has made several recommendations that seek to promote a level playing field and provide fair competition and fair opportunities for all enterprises, big and small, Government and private, to succeed. Similarly, Temasek Holdings' declaration of its Charter is a positive move that provides better clarity and transparency in Government philosophies and dealings.

Madam, my vision and hope is that, over time, we will create an open, competitive economic environment:

(a) where GLCs and SMEs will work closely together and symbiotically to build a vibrant and thriving economy, both domestically as well as externally, where each has a stake and each plays a complementary role, and where one is comfortable dealing with the other, because of mutual trust, understanding and respect;

(b) where GLCs understand and focus on their core businesses, strengths and competencies and tap on, partner, groom and nurture SMEs to break new ground, develop innovative ideas and technologies and venture into new businesses, markets and customers together;

(c) where the distinction between GLCs and local enterprises become increasingly blurred, as these terms become interchangeable when GLCs get divested, publicly listed or bought out by management or private equity, and budding local enterprises and start-ups form joint ventures with GLCs or get acquired by GLCs, groomed, nurtured and get spun off again.

However, based on the comments and anecdotal stories told by local private business people of their encounters with GLCs and Government agencies, I fear that we are still a long way from reaching and achieving such a happy state of coexistence. I sense that there may be a divide between the management of GLCs who pride themselves in having a strong culture, good corporate governance, transparencies and checks and controls, and the bosses of SMEs who feel proud being brash, daring, nimble and entrepreneurial. A lot more needs to be done and must be done to bridge the divide. Otherwise, the divide will widen into a gulf filled with misunderstanding and distrust, where each side refuses to work with the other nor share information or resources and prefers to work with its own kind, or simply goes its own way and does its own things. This is divisive. We will not have a cohesive front to tackle our economic challenges. On the whole, we will end up the poorer for it. More needs to be done for GLCs to actively engage SMEs and gain their trust, and for SMEs to improve and upgrade to secure the confidence of the GLCs that they are up to the mark and will be able to deliver.

What is the situation existing today? Today, more so than ever before, I find that our local private enterprises are fearful of the competition coming from not just the GLCs but corporatised Government agencies and larger companies as the domestic market place becomes increasingly crowded and keenly competitive. The common complaint is centred on having an unlevel playing field and being crowded out. Our smaller local companies find it hard to compete against the GLCs who have, over the years, as a result of financial prudence, sound management and proper controls, grown even stronger, leaner, hungrier and better managed than ever before.

I recall that at the millennium conference held a couple of years back, when asked by a member from the audience about competition from GLCs, Senior Minister of State Khaw Boon Wan, who was then Permanent Secretary of the Ministry of Trade and Industry, replied, "We put good men to run our GLCs well. If a GLC does not perform, we change the man." I think that sent chills down the spines of many of the private sector bosses present then. But having well-managed and competitive GLCs is not necessarily a bad thing. Our GLCs are not necessarily a bad thing to building internationally competitive Singapore companies.

It was mentioned that, in the past, we did not have sufficient private capital to fund the likes of SIA and NOL, and therefore the Government had to step in to provide the necessary funding. And that times have changed and therefore the Government should not be involved in business nowadays, and should leave it to the private sector. But if we think about that, even today, if we see the future is in wafer fabrication, which non-Government related industrial conglomerate can come up with the money to take up a meaningful equity stake in a billion dollar wafer fab plant? Can our wafer fab initiative be left totally to the private sector? And if not for the group of Hong Kong investors SM persuaded to invest in the Suntec City, which local group would be daring enough to invest in a Convention Centre the size of Suntec City at that time?

Madam, I think the Government and the Government-linked companies continue to have an important role to play even today, to build world-class international companies. If, for example, there is good business in a particular area, should we identify a GLC, promote it, manage it properly, so that it grows to be substantial enough to compete with the best in the world, and then later divest it? Or should we promote a private sector company instead? There is no one common strategy that fits across the broad range of industries. Some industries, like wafer fab, port management and airlines, must at least for now be left to the GLCs or statutory boards. Others like pastries, security systems and trade directories should clearly be left to private enterprise. The question is, where and how they should be involved and still allow room for creativity and private enterprise and entrepreneurship to flourish? And the objectives and rules must be clearly spelt out and be made transparent, and certain anti-competitive practices must not be condoned.

My colleague, Mr Ahmad Magad, will tell you that a few years ago when he was planning to set up a factory for his company in the Suzhou Industrial Park, the authority that issues the construction permit hinted to him that if he were to use a related design house and contractor, the permit would be issued in a matter of days. But if he were to choose to use his own designer and contractor, then the permit may take much longer, and even months, before it is issued. It seems that in our regionalisation drive and software transfer to other countries, some of such bad practices have been brought back into Singapore and have slowly crept into our business environment. This is not rampant as yet, but I think a larger company can quite easily say to a supplier, "If you want this business from us, then you must also use our sister company for other services." We must not allow this practice to develop and must nip it in the bud. This is beginning to happen in some sectors, and I hope that we will take the initiative and take firm action to nip it in the bud.

While a case can be made out on why the continued presence of GLCs is necessary, it is very difficult to convince the public and rationalise why statutory boards are now entering the market to compete with private enterprises. With the move towards privatisation, liberalisation and deregulation, the Government must maintain a neutral position in order to be effective as a regulator and national agency. Is it not incongruous that SPRING Singapore which spearheads SME development and upgrading owns two subsidiaries (PSB Corporation and PSB Certification) that compete with the private sector? These two entities operate as commercial organisations offering training, consultancy, technology and testing services and certification, leading to complaints of unfair advantage that these subsidiaries have against the private sector consultants. Is there a real need for statutory boards to form companies for them to achieve its mission? A*STAR, the new name for the National Science and Technology Board, formed Exploit Technologies Private Limited, which the Agency has termed as its commercialisation arm. Should CISCO, as a statutory board, venture beyond its armed protection services to compete head on with the private sector to sell alarms and security systems, services and facilities?

Madam, what local SMEs greatly need is to have GLCs help open doors for them, particularly overseas. The GLCs have the advantage of brand reputation, network, contacts, connections and deep pockets. The SMEs are looking for a small piece of the action. The feedback from private bosses is that GLCs want to bao chek, that means to take all, and bao yian, that means to win all. If they learn a good idea from the SMEs, instead of working with the SMEs, they would take the idea and do it themselves. GLCs should work hard to dispel and correct this misconception.

On the other hand, local businessmen have told me that the MNCs are more open to tapping the local support industries and outsourcing non-core activities to them. Take Hewlett Packard, for example. Throughout the years, it has certainly provided many opportunities to our local businessmen in the electronic manufacturing services and support industry, and given them a crucial leg up to help them start on their way to becoming world-class companies.

Not until recent times, when market consolidation pushes GLCs to focus on their core businesses, GLCs were aiming to be conglomerates, growing and expanding into all kinds of businesses with no regard to their strategic relevance. GLCs can gain in harnessing the creativity and entrepreneurship initiative of the local enterprises by partnering them in developing solutions that have market potential. It can be a win-win proposition for both the SMEs and GLCs as a partnership of complementary strength can be forged. Many of the budding technology companies lack the opportunity to build a track record to commercialise their solutions. GLCs and Government can provide the test bed for the solutions to gain recognition. Some of these companies are even willing to forgo commercial gains to build up their track record or even offer options for the companies to take up stakes in these companies. But not many got any headway as most of the GLCs and Government agencies prefer to take the option of DIY (do-it-yourself) or use the tried and tested. If major corporations of Singapore do not support the SMEs, how can we expect them to convince potential overseas buyers?

The Government has various grants and financial assistance schemes in place to foster innovation. But what is lacking is the creation of an environment where local enterprises can easily find opportunities to deploy their solutions. Developing project or client references is important. It is also through larger scale deployment and commercialisation that the innovative solution can be tested for its robustness and effectiveness, and stimulate continuing improvements.

Madam, local business associations' response to the SME 21 has been lukewarm. The feeling is that SME 21 will follow the fate of its predecessor, 1998 SME Masterplan, which lost its momentum when the Singapore economy picked up and the MNCs returned to Singapore. There is therefore a need to dedicate special attention and focus on SMEs, even though the economy is starting to pick up. In many advanced countries, like USA and Japan, the government agencies set up to look after the interests of SMEs solely. Therefore, this debate on how we can support the growth of our private enterprises and entrepreneurship in Singapore is timely. I believe Singapore entrepreneurs and businesses too have big dreams. The Government and GLCs can act as a catalyst to unleash the potential of the Singapore Enterprise. By supporting the SMEs, we are nurturing a culture and a mindset of innovation and creativity that marks the making of a great nation.

Dr Amy Khor Lean Suan (Hong Kah): Mdm Deputy Speaker, the Temasek Charter raises an issue which the Minister of State for Trade and Industry, Mr Raymond Lim's Entrepreneurship and Internationalisation Sub-Committee (EISC) dealt with in their recently released report. The main focus of the report is the role of the Government in business.

Public discourse has, of late, focused almost exclusively on the issue of CPF after Senior Minister of State for Trade and Industry Mr Tharman Shanmugaratnam's sub-committee released its report. However, I submit that the issue of the role of Government in business deserves equally intense scrutiny from Members of this House and the public. This is because it raises very fundamental questions about the Government's position with regard to the nurturing of local enterprises, the responsibility it places upon itself for shaping Singapore's economic landscape and hence, the nature of government and its relation with the body politic.

In my view, the Temasek Charter cannot and should not be divorced from the broader context of what the EISC document discusses. This is also in line with the essence of the Motion before this House. Moreover, it is noted that parts of the Temasek Charter, especially the section on the raison d'etre of GLCs, are in fact similar to those in the EISC document.

I therefore would like to deal with both the Temasek Charter and the EISC recommendations in my speech, under what I term as the four "Ds" of the Government in business. The first "D" refers to delineation. We need to delineate clearly the markers for Government in business. This would, among others, help reduce allegations from the private sector of encroachment and crowding out of their businesses by GLCs.

The EISC's recommendations regarding the Government's role in business cover not only Temasek Holdings but also individual Ministries and statutory boards. The EISC report is an excellent, well-thought-out and generally balanced report. There are a good number of wise and highly quotable statements from the document, three of which are particularly memorable to me and which provide good rules of thumb for delineating the boundary conditions of Government in business. These are, firstly, "We should not corporatise for corporatisation's sake." I strongly support the EISC's recommendation that statutory boards should as far as possible not corporatise regulatory functions because these are often monopoly functions and will lead to rent seeking behaviour by the enterprise.

There would be a natural tendency for the public to perceive, rightly or wrongly, that the enterprise will resist simplifying rules and regulations as this could lead to a loss of revenue in fees and charges. Hence, the often heard refrain that the Government's fees and charges are high and should be cut.

The IRAS, for instance, was previously criticised, in The Straits Times of 9th January 1997, for announcing its staff increments and bonuses took into account the amount of tax revenue collected. This led the public to infer that the IRAS staff had every incentive to maximise its tax collection!

Like the EISC, I submit that it will be better to keep activities of statutory boards that are strategic to their missions as public functions, even if the activities can be organised to attract commercial returns. We should not corporatise for corporatisation's sake or just because everyone is jumping on the bandwagon. In this respect, if corporatisation is deemed necessary, the EISC mentions the use of the National HealthGroup model, which I wholeheartedly support.

The second rule of thumb, as recommended by the EISC, is, "Temasek Holdings should compel GLCs to scale up their core competencies to build global businesses, as opposed to concentrating on the local market to build a diverse range of unrelated businesses." Some GLCs (such as SembCorp Industries and NOL) and corporatised enterprises of statutory boards (such as Ascendas) have already initiated this aggressively. Other GLCs and corporatised entities should also strive to do the same. Their reliance on the local market should be reduced and the temptation to invest in a diverse range of unrelated businesses to improve their bottomline or simply to justify their existence should be resisted. This would minimise the crowding out effect by GLCs which many SMEs complain they suffer from.

Over the last three decades, GLCs have proliferated and taken on a life of their own. As noted in Business Times, 3rd June 2002, Singapore Technologies, for instance, has spawned so many subsidiaries that if its new Chief Executive, Peter Seah, were to visit one a day, it would reportedly take him up till 2005 to complete his rounds.

Hence, any major attempt to divest or rationalise the GLCs could trigger a chain reaction, upsetting an entire apple cart of entrenched interests, institutional arrangements and corporate culture and agenda. Fortunately, as noted by the EISC, many GLCs are professionally run, profitable, listed on the bourse, and own reputable and thus valuable brand names that should not be destroyed purely to silence the large contingent of GLC critics and cynics.

Nevertheless, history does contain some lessons for us. The 70s and 80s were the era of the conglomerate. It became fashionable among businesses in the US to integrate vertically, horizontally, or even sideways, to cover the entire, or even out of the value chain. The result was a mish-mash of business units often unrelated to the original function. The holding company of the conglomerate, in effect, became a kind of internal stock market, allocating funds to its subsidiaries on the basis of financial performance.

By the late 80s and early 90s, it became evident that this strategy created large unwieldy corporate creatures without the agility to compete against more nimble firms that chipped away at their respective businesses.

Research in the US has shown that the decline of these conglomerates stems from the enormous difficulty of managing a diversity of unrelated operations. The reaction was to return to "core competencies" and a painful dismantling of these large business units. The semi-conductor business, for example, now organises itself around chip designers and foundries which are, in fact, sub-contractors to the former.

There is a danger that GLCs and Government agencies may sometimes fall into the trap of acting in the manner of the now discredited corporate conglomerates. I speak from my personal experience. During the heydays of the property market boom in the mid-90s, not a few non-property GLCs were tempted by the astounding profits one could make from property investment. To be fair, GLCs were not the only firms to succumb to that temptation. On hindsight, property investment could indeed have delivered superior shareholder returns, but most firms did not exit quick enough.

Thus many of these firms came to grief when the bubble burst, causing them to abandon their grand plans to turn into property players. Many of them have since unwound or are unwinding unrelated businesses to focus on what they do best, for instance, Delgro and NatSteel. Madam, I hope that GLCs will be ever mindful of this chapter of their history and not turn back the clock.

The third rule of thumb refers to the well known "Yellow Pages" rule. Instead of endorsing the EISC's recommended Yellow Pages rule, the Temasek Charter has, instead, chosen the opposite route - seeking to build on the best attributes of Singapore's unique GLC's model. Rather than destroying the value of GLCs which first took shape more than three decades ago, Temasek has chosen what is probably a more pragmatic incrementalist approach and eschewed the idea of privatisation for privatisation's sake. Instead, GLCs are to be run as commercial entities.

This is not unlike the EISC's recommendations that GLCs should not do national service and only people who can contribute to the businesses of GLCs should be appointed to the boards. The GLCs are to shape up and perform. Otherwise, they may have to be shipped out or, in the words of Temasek's Executive Director, Mdm Ho Ching, be prepared to be had for lunch.

GLCs are to focus on core competencies, divest non-core businesses, but more importantly, they are to build significant international or regional business. Businesses that are no longer relevant or have no international growth potential are likely to be divested. I will talk a little bit more about the internationalisation aspect later.

Nonetheless, the "Yellow Pages" rule proposed by the EISC would still be relevant in the case of statutory boards, who should adopt this rule to set up enterprises only if the private sector is not providing or is unable to provide a particular service. And I think this was affirmed earlier by the Minister of State, Mr Raymond Lim. In the past, the private sector was underdeveloped and thus unable to provide a host of much needed and vital services.

The private sector has now become much more sophisticated and reached a degree of maturity, as evidenced by the likes of Creative Technology and City Development. They have proven to be highly versatile at adapting to and exploiting evolving market trends and technologies.

Statutory boards must religiously adopt the principle of not setting up an enterprise unless all avenues to involve private sector enterprises are exhausted. Even so, statutory boards could still seek to be involved with the private sector through joint ventures, or what is currently a global corporate favourite - outsourcing - instead of setting up an enterprise by itself. This would help to create more space and opportunities for the private sector.

In light of the above principles enunciated by EISC, I fully endorse the three-fold rationale stated in the Temasek Charter for the Government to be in business. And these are to manage strategic, critical resources, such as water, power and gas; to pursue public policy objectives, such as healthcare, housing and education; and to enable Singapore to sprout a second wing - an external wing - so that we, as a nation, can compete beyond the narrow confines of Singapore's geography, or perhaps to quote some famous words from "Star Trek", "boldly go where no man has gone."

Many large, as well as non-listed, GLCs fall into the first two categories - Group A which is what is referred to as Group A businesses - media, water, power, sea and airports. Additionally, many non-Group A category GLCs are already loosely defined in category (3) and referred to as Group B businesses.

Let me now deal a bit more with the internationalisation aspect, or what I call, the second D, and that is, Diaspora. I submit that, with some exceptions - notably firms, like the Millennium and Copthorne Group - private enterprise will probably not attempt to enter, much less, conquer, lucrative overseas markets without some nudging from the Government and GLCs leading the way. Hence, Group B GLCs will undoubtedly play a key role in the internationalisation of Singapore's private firms.

However, a word of caution is in order here. GLCs must be constantly reminded that they should not internationalise for internationalisation's sake. Based on Singapore Inc's track record till date, Singapore companies that have succeeded in international markets have been rare, and profitable international expansion has even been rarer. But the value of the Singapore brand is undoubtedly high, as experience in rapidly developing countries, like China, demonstrates. There are thus wonderful opportunities for a Singapore Diaspora.

GLCs must be mindful that the promotion of the external economy is only justifiable if it generates higher returns than the potential growth rate of Singapore without the external economy. The burden must be on the GLCs to deliver superior returns on the external economy to justify their course of action. Expanding aggressively but blindly into international markets could, instead of improving our economic bottom line, do it more harm.

In my view, the quest for a more diversified earnings base by overseas expansion is a necessary but insufficient condition for category B GLCs to internationalise. IE Singapore, whose role is to grow our external wing, should make every attempt to link these GLCs up with suitable local private sector firms willing and capable of expanding overseas in the chosen markets. This way, definite benefits will accrue to both parties, private and public sectors.

The third D refers to Detachment. The Temasek Charter has emphasised the commitment of GLCs to be run as commercial entities, detaching ownership by Government from commercial-minded management. Furthermore, they are to strive to be truly international businesses, with clear strategies on how to get there. Similarly, the EISC's recommendations also favour a commercial approach for GLCs. Indeed, Temasek's choice of the term "TLCs" to describe its large and formidable stable of companies seems to reinforce its desire to de-link itself from the Government. But the question is: "Can it really do so?"

As the EISC notes, Temasek should make a conscious effort to cast a wide net to attract world-class managerial talent into GLCs, foreign or otherwise. Indeed, Temasek could bring more private sector directors on the boards of its companies and management to ensure a good mix of people, able to give different perspectives and ensure that the companies are run on sound commercial principles - delivering commercial returns.

To allow a good mix, Temasek should avoid appointing too many Government and SAF scholars - undoubtedly highly intelligent, driven and capable people - to the ranks of senior management of these companies. Undeniably, many of them have subsequently carved out sterling careers in the private sector. However, even though these people are placed in the private sector, they may not necessarily be of the private sector.

Scholars carefully groomed by the system and attuned to the culture of the public sector, parachuting into key positions in GLCs, may have a propensity to carry with them a Government mindset that does not sit well with the workings of the private sector. I submit that there should be a greater degree of intermingling of public and private sector talents in GLCs. It must never be construed as a zero sum game when a public servant is lost to the private sector, and vice versa. Indeed, the intermingling will serve to enrich both.

The fourth and final D refers to Divestment. While supporting the spirit of divestment where appropriate, the Temasek Charter does not spell out any definite divestment timetable, as some of my parliamentary colleagues have alluded to earlier. Instead, Temasek notes that it has been progressively divesting its stake in non-strategic companies and listing some companies to broaden their ownership base. It also states that it will continue to rationalise and consolidate its shareholdings where it is opportune to do so. The argument for the lack of a definite divestment programme is the need to achieve the best price for the unit being divested. If market conditions are not right, it makes no commercial sense to do so.

Mdm Deputy Speaker, whilst I agree that this is largely a reasonable path to take, and I am certainly not advocating a great GLC sale, we have to be mindful that the cost for not divesting soon enough could be even higher, and that is the killing off of private enterprise. As a compromise, I suggest Temasek perform an annual divestment audit, taking into account other than the usual factors, like capital market conditions, strategic relevance and likely price, the impact on the private sector of divestment or otherwise. Further, subject to suitable safeguards, the divestment audit could be tabled in Parliament for debate. This is another way of putting in place what the EISC has itself recommended - mandatory periodic housekeeping.

In the divestment programme, Temasek should also not be averse to the dismantling of its companies. Size, though useful, is not always a competitive advantage. Specifically, there should be a proper cost-benefit analysis to determine if the break-up value from the different logical parts of the business exceeds the value of the entity as a unified whole.

In saying this, I must state that I am not against size for its own sake. I also recognise that the competition law that the EISC speaks of, operates only to break up the abuse of monopoly power, not monopoly itself. But quite apart from what the future competition authorities can and will do, Temasek itself, as arm of the Singapore Government, should proactively ensure that the actions of its subsidiaries do not stifle private enterprise through the sheer weight of its size and market power. Another model I support is the management buy-out which has been proposed in the recent case of NatSteel.

There is a need for Temasek to act more decisively in its divestment programme, lest the Charter be construed as mere talk without action.

In conclusion, I would like to applaud the efforts of the relevant parties in preparing both the EISC documents and the Temasek Charter.

Since Temasek was formed in 1974 as the Government's investment holding arm, it has grown to include more than 60 major companies, with subsidiaries and associate companies in almost every economic sector, with a workforce of some 150,000. This is more than twice the size of the entire civil service, which is currently reported on the website as about 60,000 strong. Furthermore, the top 22 GLCs are reported to account for 13% of the country's gross domestic product in 1998. GLCs are thus indeed very significant and play an important role in Singapore's economy.

Madam, I submit that times have changed. GLCs will need multi-industry knowledge, technology assessment capabilities, and financial expertise well in excess of what it now has. Recall the lessons of the conglomerate and its demise.

Recognising that the private sector provides the best seedbed for enterprise and innovation, it will need all the space it can get - physical, financial and economic. In this regard, the business of government is ultimately not government in business, but government for business - planting, watering, pruning, nurturing - to grow and nurture the future heroes of capitalism that will spearhead the next stage of Singapore's economic development and, in the process, we could convince more would-be quitters to be stayers.

Madam, I therefore support the Motion.

7.05 pm

Mrs Fang Ai Lian (Nominated Member): Mdm Deputy Speaker, I rise in support of the Motion to implement the recommendations of the Entrepreneurship and Internationalisation Sub-Committee (EISC). I fully support the recommendation to redefine the role of Government in business and to call on the Government to support local private enterprise. I particularly like the idea that Government-linked companies should work in collaboration and partnership with small and medium enterprises to complement their business rather than to compete with them.

Much has already been said in Parliament as well as outside as to how GLCs stifle and crowd out private enterprise. However, I would like to say that it is equally important that we do not over exaggerate the negative side of GLCs because, by and large, they have not done too badly. They have done quite a good job. They are run professionally, efficiently and also profitably. They provide a lot of jobs for our people and they also contribute to a significant part of our GDP, some 13%. A handful of them - I am glad that bouquets have also been thrown at GLCs - have helped Singapore establish its international brand name. And it is because of the good reputation caused by GLCs, a lot of local enterprises have been helped in their marketing efforts overseas.

Because of the hue and cry and criticisms levelled at GLCs, some of them have already begun the process of collaborating with local enterprises. The logistics arm of SembCorp Industries teamed up with Goodpack to make use of their specially developed metal containers to international bulk carriers. We also have CapitaLand with Kinderkids World providing childcare services at their properties abroad. All these are positive developments and ought to be acknowledged. Of course, a lot more can be done and a lot needs to be done.

Whether private enterprise would have flourished without GLCs is a moot point. But it is clear that GLCs were formed at a time when private enterprise was either unwilling or unable to get into businesses which GLCs went into. Of course, there are many instances where GLCs slipped their fingers into one pie too many. But most of that is the past, and I think they are also embarrassed. So, let us not harp on it. Let us move on and find the proper solutions.

The recommendations of the EISC as well as the New Temasek Charter recently unveiled are all steps in the right direction. There is a recognition that Singapore today is not quite the same as it was many years back and, in the new situation, the role of Government in business needs to change. This role, however, need not be changed so quickly and so drastically. Some of us may think that the remaking of Singapore is all about turning Singapore upside down and inside out, but life is not quite so simple as that. Some things can be done, some things cannot be done, short of shooting your own foot.

GLCs, because of the magnitude of their presence in the marketplace, it would be imprudent to have a sudden divestment of businesses worth billions of dollars, involving hundreds and thousands of jobs. This will surely destroy shareholders' values, and shareholders are Singaporeans. It will destroy shareholders' values and it will destroy jobs. This will not be good for us and clearly, it will not be the right step to take.

So, we need a much more well-managed and organised approach towards divestment, and I am glad that the EISC as well as Temasek Holdings are taking the positive and right steps in this direction. What is much more important is the development of the entrepreneurial spirit. This is not an easy task, but steps are being taken. They are pushing this goal, but we have to recognise that it is going to be a long haul because we are starting fairly right from the bottom.

At this juncture, I would like to share with the House a report published by Global Entrepreneurship Monitor (GEM), which is an international body which tracks entrepreneurial activity worldwide. In its 2001 report, it compared some 29 countries. We fared not so well. We were ranked 27th out of 29. In its 2000 report, we were 19th out of 21. So we are quite far away from the Number 1 position which we would like to occupy and boast about.

Why is this so? Critics of GLCs would probably jump at this and say, "I told you so! GLCs are crowding off local private enterprises." But the real reasons are quite complex. The GEM report recognises that Singapore has a rather unique challenge and handicap. This is because, as Mdm Deputy Speaker has said, we have a rather small domestic economy. This means that, by necessity, businesses must venture overseas in order to acquire a size that matters. Businesses may argue that if they have had the entire domestic economy to itself, small as it may be, it will give them that start-up advantage. But we have to remember that we operate an open economy. If we do not compete against GLCs, then we will have to contend with MNCs. So, in a way, the GLCs provide a check against MNCs. But, whatever the reason might be, there must be a recognition that because of the smallness of our economy, businesses must, by nature, strike out and acquire a size that matters.

The GEM report also noted that the Government has already promoted entrepreneurial activity in the technology area. This is a good practical approach, because it is in the cutting-edge of technology and life sciences that we have the greatest chances of success. But even this approach has its pitfalls, as the Internet bubble has taught us a few painful lessons. But the point here is that by playing safe, focusing on a few technology companies, we are actually also going against the grain or the spirit of entrepreneurship, which is not being afraid to fail. Therefore, I would like to urge the Government to promote greater entrepreneurship. It is not just about high-tech; it should also be medium-tech, low-tech and no-tech, because the whole spirit of entrepreneurship is also about the spirit of self-reliance. If we look at the products and services we use everyday - the food we eat, the clothes we wear, the chairs we sit on - these are no-tech businesses. These are services and products provided by businesses with a few thousand dollars or millions of dollars of turnover. But one thing is common. They are started up by entrepreneurs, either out of necessity or out of a passion, ie, their ability to know that they can do something better than others. So, whatever their motivation, it is important that we encourage and support them, because it is out of a large pool of entrepreneurs that some superstars can emerge.

We can use the analogy in football, I suppose. Brazil has won the World Cup a few times, and this is because an entire nation is just crazy about football. So, they have a lot of footballers to choose from. All young Brazilian boys play it on every piece of land that they can find. We also celebrated a trawl of four goals in the recent Commonwealth Games. We won in table tennis and badminton, games which are not entirely popular with Singaporeans. But we won because of imported foreign talent. That is not so bad. And this is the same formula which has won us many goals for our economy. We won because of foreign direct investments, and this has helped us to achieve remarkable growth.

But this is not quite the same. We could have continued this strategy, but the landscape has changed. So it is important that we grow more local entrepreneurs. But it has to be also noted that there is a direct correlation between foreign direct investment and entrepreneurial activity. The GEM report noted that, in the case of Belgium - only Belgium and Japan were ranked below Singapore - it was a country whose economy is very highly dependent on foreign direct investment and international trade, its entrepreneurial activity is abysmally low. So, critics said that this was due to the fact that foreign direct investments just make entrepreneurial activity less attractive. But the GEM report also noted that Belgium did not quite help itself in terms of entrepreneurial training to help shape attitudes and behaviour. So, entrepreneurial training was only present at the undergraduate and graduate level, but it was totally absent across the system relating to primary, secondary and pre-university level. Therefore, it just did not stimulate the attitudes which were so vital for an entrepreneurial mindset and environment.

So, perhaps, we too can look at our own education system. Our schools now focus very much on academic results, and our vocational institutes, on technical skills. This orientation has obviously served us well for many years. We will continue to require brilliant academics, competent technicians but, at this stage, we need something more. So we need to weave into our education system creativity, entrepreneurial attributes like dare-to-dream and dare-to-fail. That way, we can develop and shape attitudes amongst our young.

I would like to end by looking at which are the countries which are ranked well, and what are the lessons we can draw from them. The dark horses were Australia, New Zealand and Mexico. I call them dark horses because they do not really have exactly high-profile economies. But they were ranked very highly in terms of entrepreneurial activity. And this was attributed to the fact that there was a high level of government awareness in this area, promoting entrepreneurship and having an active engagement with entrepreneurial leaders as well. In the case of Mexico, its economy was very much dominated by large public and private monopolies, and yet entrepreneurship is very much alive and thriving. This is because these large public and private companies actually outsource their activities to the small independent businesses which are able to run in a much more agile manner. Hence, the point made on outsourcing many times over.

Korea was also ranked very highly and this was due to the fact that it was able to address the problems surfacing from the 1997 Asian economic crisis very well. It was able to develop very specific measures, in particular to develop new businesses. As we remake Singapore, I think there are lessons to gain from the Korean experience.

Lastly, the great entrepreneurial star - the United States of America. It has been a star for many, many years. This is because its culture embraces change and opportunity seeking. Entrepreneurship is very much regarded as an accepted and highly respected occupation and failure is regarded as an accepted learning experience.

I think we too can develop a culture which embraces change and opportunity in a big way. We too can make entrepreneurship an accepted and highly respected career and we too can make failure an accepted learning experience.

Along the way, we must have Government incentives and support. We must have laws and regulations lightened. We must have the GLCs now working more and more in collaboration and in support of local enterprise.

More than that, we need a complete transformation of the entire nation's attitude towards entrepreneurship. It is a good start. It is a long haul but it is very encouraging.

On that note, Mdm Deputy Speaker, I support the Motion.

Dr Gan See Khem (Nominated Member): Mdm Deputy Speaker, I would like to support the Motion by Mr Leong Horn Kee and Mr Inderjit Singh and share in their request for the Government to consider the implementation of some of the key recommendations of the EISC on Government in business.

The other speakers ahead of me had spoken persuasively on the merits of the recommendations and also commented on the need for Singapore to encourage the development of entrepreneurship and local enterprise and I need not elaborate again.

The GEM report has accumulated evidence from their research over several years that documents the significant relationship between entrepreneurship and national economic adaptation and expansion. From the GEM report, it does appear that in less-developed and developing countries where the economy is less dependent on international trade, where there is less extensive social welfare system and the women are less empowered in the economy, necessity entrepreneurship dominates and it is positively related to the state of economic development. India ranks very high in this score.

On the other hand, in the more developed countries, opportunity entrepreneurship dominates. The GEM report finds that the rate of opportunity entrepreneurship is higher where there is reduced national emphasis on manufacturing, less intrusive Government regulation, higher prevalence of informal investors and a significant respect for entrepreneurial activity. In this aspect, the USA is a case in point.

As my colleague had mentioned earlier, Singapore has one of the lowest rates of entrepreneurial activities amongst the GEM 2001 countries. Many unique national features were earlier cited to explain the lower level of entrepreneurial activities in Singapore. These features are embedded in our social and economic systems and we need to actively implement some of the key recommendations of the EISC report so as to create the necessary mechanisms and structures to improve our rate of entrepreneurship activities.

In view of our national goal of creating a more vibrant and more diverse economy, we need to increase the rate of public and private investment, devoted to entrepreneurial activity so as to accelerate innovation, technological development and job creation. In the Singapore economy, there are 103,000 SMEs which make up some 90% of all establishments and employ 50% of the workforce. These SMEs contribute only 35% to our GDP, whilst MNCs contribute 45% and, as I understand earlier, the GLCs contribute some 13%.

This formula had worked in the past but we need to continuously improve the share of private entrepreneurial activity and create an environment whereby local enterprise can develop the capabilities, resources and size that would allow them to compete in the regional, if not, the global marketplace. The creation of such an entrepreneurship society can only benefit Singapore's economic development.

As Singaporeans, we are heartened at the success of our GLCs, particularly in their ability to move into the knowledge, technology and capital intensive sectors, both locally and also in the international arena. GLCs were set up to spearhead the development of the Singapore economy and they had fulfilled their mission. That said, I hope that the GLCs would continue to play a role in spearheading the remaking of the new Singapore economy.

We appreciate that Temasek Holdings had come forward and shared their new defined Charter and articulated the role of the Temasek-linked companies to all Singaporeans. However, I would like to urge the other sectors of the GLCs including the labour-linked companies (LLCs) (some of my colleagues call them NLCs), the statutory board-linked companies (SBLCs) and the press-linked companies (PLCs) to follow the example set by Temasek and share their strategic roadmap with Singaporeans. I believe that such communication would address the anxiety of the local enterprises in terms of the perceived unfair competition from GLCs.

TLCs had communicated and informed Singaporeans that they intend to spearhead the development of enterprise and to partner other non-TLCs, including local SMEs, when venturing into more knowledge-based activities and regional markets. TLCs, in this instance, can play the role of the big brother or sister, where the case may be, to invest value-add and partner with the private sector to groom viable local enterprises to compete effectively in the regional arena. I am sure that local SMEs would look forward to further dialogues and exchanges with TLCs to work out effective and profitable collaborative arrangements. I also hope that over time, our local entrepreneurs will associate TLCs with the acronym, "tender, loving care", signifying a more pro-business Singapore.

There is a renewed marked shift globally towards private-public partnership (PPP) as an engine for growth. PPP recognises that both the public and private sectors have certain advantages relative to the performance of specific tasks. Thus, by allowing each sector to do what it does best, public services and infrastructure can be provided in the most economically efficient manner. In the United States, over the last couple of years, there have been much renewed intense discussions on how the Government can work better and cost less.

Recently, this focus has led to discussions as to whether or to what extent the private sector should be performing many of the functions currently performed by the Government. With budget deficit reduction and the downsizing of Government agencies, the American attention on privatisation, competition and efficiency has greatly increased. In Ireland, PPP has been widely implemented, initially through modestly scaled projects, with the aim of combining the best of public and private sector expertise to create value for money and quality outcome.

PPP has been encouraged through many economic sectors, such as housing, education, healthcare, local service, public utilities and transport. According to the GEM report, Ireland has the highest total entrepreneurial activity within Europe. The World Bank has also articulated their emphasis on private sector participation as engines for growth. In recent years, the World Bank has encouraged private participation not only in infrastructure development but also in human services, most prominently in education, healthcare and social security.

As Singapore faces major technological transformation and a maturing economy, both the public and private sectors must share the responsibility of defining new national strategies that would unleash human creativity to enable us to innovate and adapt technologies and opportunities to our own needs. Singapore needs to build our own model for public-private partnership. Thus, it is also timely for our public sector to review the potential of PPP in their activities and to share such visions with Singaporeans.

However, the experience of other countries has reminded us that though the opportunities for privatisation are plentiful, the path to successful business relationships and implementation of PPP nevertheless would face many challenges. I believe that for PPP to work in Singapore, we need to realistically identify the hurdles to successful PPP implementation, to develop the administrative structure to enable PPP to put into practice and to formalise an incentive system that would foster collaboration and cooperation between the two sectors for the benefit and long-term needs of the nation. The success of PPP in Singapore would depend to a large extent, on a well-thought out charter and plan that is effectively communicated to different stakeholders such as the one articulated by Temasek recently. I hope that the other GLCs and relevant Government agencies would also share their plans with us in the near future.

Unlike TLCs which would primarily play the role as the co-investor, other public sector agencies can participate in many other forms of PPP which may include outsourcing, contract services, build, operate, transfer, and many other types of PPP.

Successful PPP can only result if there is commitment from top public officials who are willing to be actively engaged and support the concept and taking a leadership role in the development of such partnerships. Equally important is that the private sector partners must have the relevant skills and experience in the specific area of partnership being considered. Once the partnership has been established, the public sector must remain actively involved in the programme or project not only in terms of monitoring, but also in value-adding. As such, PPP will provide the platform for the creation of more opportunity entrepreneurship, thereby enabling Singaporeans to continue to expand our economy through increased entrepreneurial activities.

I would like to reiterate, Mdm Deputy Speaker, my support for the Motion proposed for debate this afternoon.

Mr Wee Siew Kim (Ang Mo Kio): Mdm Deputy Speaker, thank you for allowing me to speak on the Motion.

Perhaps I would start by giving an analogy which encapsulates my opinion on the debate on GLCs and the SMEs. In an ecosystem, there is a dynamic complex of plants, animals and micro-organisms and their non-living environment interacting as a functional unit. Each, regardless of size, has a role to play in the web of life. For example, in the ocean ecosystem, the oceans support a wide variety of plants and animals which co-exist in relative harmony, each fulfilling a specific niche and role they have in the ecosystem. While in any ecosystem there is competition and survival of the fittest, there are also symbiotic relationships. The ecosystem is really a matrix of inter-relations, not just a singular approach or formula. Take, for example, the little cleaner fish in the ocean. How does it survive? Often, tiny micro-organisms fasten themselves to a big fish and make sores on its body. When this happens, the big fish goes to a coral reef where the cleaner fish lives. The cleaner fish hunts all over the fish body, and helps the big fish by eating all these tiny micro-organisms and, in this way, the cleaner fish gets fed and the bigger fish is spared the discomfort. An economy is similar to the ecosystem. As such, there is a place and role for large corporations and smaller enterprises. The difficult part is how do we go about this balancing act.

Let me share with the House my thoughts on this. Rather than just levelling the playing field in Singapore for the SMEs, there should be more constructive ways to help them grow, compete and survive beyond our shores. The Chinese proverb - give a man a fish, and he would eat for a day; teach a man to fish, and he would eat for the rest of his life - is very true. There is no level playing field in the economic world anywhere. So, why create an artificial environment that will only ensure local survival? What is at stake is continued and global survival.

Here, I believe there are two key elements which are critical to any GLC versus SME debate. The first is the definition of our economic ecosystem. We must realise that the playing field is not just the domestic market. Rather, the economic ecosystem is well beyond Singapore. We must not run the risk of debating how we should compete locally, ie, keeping the balance in our pond ecosystem while the larger ocean ecosystem, which is globalisation, washes us over and leaves us in its wake.

In our discussions, we must be mindful that the mission is building establishments out in the world for our descendants, so that wherever we decide to stake out, there is always HQ Singapore. To have such global ambitions, we need a strong home base, just as the SMEs want to build a strong home base, so we should not deny the GLCs the same. A strong home base will better prepare our companies to take on the world. There is an incessant cry that SMEs are being crowded out. When faced with Goliath, David may have just cause to cry foul. But, paradoxically, organisational ecologists have observed empirically that increased dominance of large firms actually creates an environment that is hospitable to the entry of smaller specialist organisations.

The August issue of Stamford Business further reported that this is seen in industry after industry - breweries, airlines, auditing, music recording, newspaper publishing, manufacturing of hard disks, etc. As large generalist firms tend to go for the market centre, niches appear around the periphery. In beer parlance, the small craft brewers moved in to provide consumers with a wider variety in taste, colour, form and serving temperature.

The vibrancy of the local business landscape is borne out by the statistics. In the 10 years, from 1988 to 1998, the number of SME establishments grew by 59%. The same organisational ecologists also subscribe to the red queen theory. Remember the red queen in Lewis Carol's fairytale "Through the Looking Glass". The red queen seems to be running but actually staying on the same spot. What it means is that competition is good, in that a company is forced by direct competition to improve its performance, in turn, pressurising its rivals to do so, thereby creating a virtuous cycle of learning and competition.

A research has revealed that a lack of domestic competitive experience is a critical disadvantage when a firm is thrust into global competition. Hence, a competitive landscape must be nurtured. So, it is not a question of snuffing out the big boys, neither is it that the SMEs do not have a role in embracing and enhancing Singapore's competitiveness and economic growth. Rather, let us see how we can harness the strengths of the GLCs to nurture and promote the SMEs, so that they can also get bigger, stronger and fly the Singapore flag in the world. Coexistence of the GLCs and SMEs would have to be the way forward, honing our capabilities within our shores, so that once we foray abroad and leaning on brand Singapore, which is one that is already recognisable, one with high regional and global awareness and standing for efficiency, fair dealing and transparency, we will have a much better overall chance of success and survival.

Competitive coexistence

Here are some of my suggestions. First, let us network and talk. So, what is so difficult about this especially where we proactively do this with overseas businessmen and potential partners? Strangely enough, I suspect that we do not do enough of this between the GLCs and SMEs. We need a bridge to connect the GLCs and SMEs. Through this bridge, ideas can be exchanged, lessons learned can be shared, new business thoughts may spring forth and partnerships may blossom. These partnerships may be between GLCs and SMEs or even among the SMEs themselves. Perhaps IE Singapore can be the business SDU to bring these parties together. Or the Chambers of Commerce and industry associations can act as catalysts. A forum needs to be created. Just as our successful SDU has dinner talks, tea parties, social activities and match-making capabilities, this business SDU can do the same for GLCs and the SMEs.

Secondly, GLCs can play an active role in helping SMEs venture abroad by partnering them when they seek new pastures. A business associate, which I think was also mentioned by an earlier colleague, shared with me the observation on Taiwanese businesses venturing into China. When these businesses have identified opportunities in China, they bring along their suppliers with them. Together, they almost replicate their entire supply chain in China, ensuring a better chance of success. They work with people they know best. They link hands and venture out together. It is a united approach with all parties benefitting - an interesting business model worth considering for us in Singapore.

Our GLCs have a strong home base and are better placed to venture abroad. They also have the management and financial capabilities. So, what is stopping these GLCs from bringing along their local suppliers along with them? It may mean to be more proactive in identifying good SME suppliers with potential to be part of a winning combination. It may also mean helping these suppliers by equipping them with the know-how to improve their efficiency or management, so that they are more ready to weather the perils beyond our shores. This will help shorten the SMEs learning curve by being able to piggy back on the GLCs.

In SME 21, the often mentioned structural weaknesses of the SMEs tend to be centred around inefficient use of technology, outmoded methods of production, limited ability to tap economies of scale, shortage of professional and technical manpower, insufficient management know-how and professionalism. I believe the emergence of a partnering culture between the GLCs and the SMEs would mitigate, to a large extent, these structural issues. It has to start with the building of trust.

The SME 21 plan intends to treble the number of SMEs with sales turnover of $10 million or more to 6,000. With such growth, I believe that there are great opportunities that exist, and these cannot remain untapped, just because no one makes the first move or we are focusing our energies on only competing amongst ourselves. IE Singapore's Network China has been successful and Network India is being set up. Can the GLCs not partner some SMEs and tap into these markets together? Perhaps IE Singapore can play the matchmaker, and it must have mechanisms in place, so that the concern of appearing to be partial whenever one SME is being selected over another does not hold back initiatives.

Clusters created to foray overseas must be based on good business case with the best chance to win. To consciously make this happen, we should reorientate our view of GLCs and judge them on how much their business is derived offshore and how many local SMEs they have spawned or partner with in their ventures.

Singapore is an economy that has seen a rapid transformation from third to first world in one generation. It is unparalleled. We are unique with unique strengths and constraints. In short, we learn from others but we need to adapt. In trying to transform, we must not throw out the baby with the bath water, as this is said three times today. We must not slay all our sacred cows and then discover that the alternatives are stillborn.

In conclusion, we must remember that we are Team Singapore. In a team, there are defenders, midfielders and attackers. The ultimate goal is that Singapore should win. In-fighting amongst the players to get choice roles will just jeopardise our chance of winning. We are Team Singapore and in the SME 21 plan, which is characterised as a partnership between Government, Chambers of Commerce, industry associations and the private sector, it should also be expanded to include the GLCs as well. We are no longer only playing home matches. We are in a global match. And in the away games, we must train to win. While the debate is on GLCs, I think there is and must have resolve to ensure that the momentum behind SME 21 does not fizzle out. We must stay the course. As in the ecosystem analogy that I started with, a symbiotic relationship with competition in specific niche areas will have to be one of our formulae for going forward. So, in the Motion which supports competition, which nourishes the spirit and culture of partnerships, and which squarely sets the sight on the external wing, I am supportive.

Miss Penny Low (Pasir Ris-Punggol): Mdm Deputy Speaker, thank you for allowing me to join in this debate.

The raison d'etre of GLCs and Temasek has been well documented. The reasons for the GLCs' existence was when the SMEs were not able to access capital on their own, or there were insufficient entrepreneurs that had the capacity to risk large quantum of capital. Singapore then needed the GLCs to build up the strategic industries to put Singapore on firm economic, social and even political pedestals. It was for the sole reason of survival, and the GLCs have done a good job. In fact, they were so good at what they do that, over the years, the GLCs have grown to cover a multitude of business enterprises - many of which are perceptibly to be in direct competition with the private sector. After 37 years of independence and rapid economic growth, our private sector is also a lot more mature and capable. Coupled with the challenges of the new economy in the global playing field, we need to re-examine our modus operandi, and make relevant the roles of both the GLCs and the SMEs, so that we, as a nation, can strive and thrive.

Interestingly, I also have an analogy which is based on the ecosystem. Since we are an island, please allow me to use the analogy of fish and water. The GLCs are like fishes that were originally introduced to a pond to promote life, to promote growth. Over time, it keeps spawning and while the pond can still maintain an ecological balance for coexistence, it remains placid. However, when the spawned fishes begin to grow and become overwhelming, the ecological balance within the pond is disturbed. It has now reached the point where the pond has become too small for this growing ecosystem. In order to survive, the big will eat the small fishes and even compete with its own kind to survive. The ecological system is out of balance.

Scepticism and Distrust: Playing Field

Madam, the private sector reckons the GLCs to be the fishes that have multiplied and grown to a monstrous size in a small pond. Willy-nilly, there appears to be a two-way scepticism and distrust between the big fish (GLCs) and the small fish (SMEs). In fact, some SMEs avoid contact with the GLCs whenever there is a business opportunity for fear that the GLCs may muscle them out of the business. This may well be true as GLCs function as a profit organisation, and have often demonstrated that new entities can be created whenever they want to take advantage of an opportunity. Without the necessary financial muscles and network, the SME simply cannot replicate companies with the same speed or size that GLCs can.

To illustrate, we have a GLC that prepares, manufactures and distributes food, ranging from chilled meat, ready-to-go meals and even right up to hog auction and abattoir. The original raison d'etre of this GLC was one of strategic defence. But how does the slaughtering of hogs contribute to the defence of Singapore? GLCs are also found in other non-strategic industries, for example, Internet Service Provider, travel agency, supermarket, real estate development and management, IT and business consultancy, systems integration, outsourcing networking, e-commerce, and so on and so forth. Even more recently, HDB, via its subsidiary firm, HDBay, is also getting into the Local Area Network business! In fact, if we include the NLCs, which is a term coined by Mr Leong Horn Kee, they provide goods and services from cradle to grave. Can we really blame the SMEs for keeping a distance from the GLCs? Perhaps, to be fair to the GLCs, such companies were created so that the GLCs can have better control and it could be part of the risk management strategy. But this is also precisely where the problem lies. If we want to cultivate entrepreneurship, then this mindset must change, both on the SME side and GLC side. Some things are indeed much better left to the private sector. And we need to have more faith in the market forces.

Foster Culture of Partnership

Beyond SMEs, beyond GLCs, we as a nation in challenging times must come to sell all enterprises as valuable to our economic aspirations. We need to see a vibrant culture of cooperation and partnership between GLCs and SMEs. They both can and must play their role in the remaking of our economic thrust and should receive equal facilitation and support from the Government.

To continue on my imagery analogy of the fish and water, I would like to see the Government, and perhaps even Temasek Holdings, provide the lead to ease the congestion in this small pond, by digging a trench that would provide alternatives to the contents of this small pond into the open sea of the global economy. Once the monstrous fishes in this small pond enter the open sea, they may no longer be that big. This is where the GLCs and SMEs can come together, support each other and assert themselves in the new environment. I urge the Government to adopt the recommendation of the EISC to "encourage a culture of partnership between GLCs, MNCs and SMEs and adopt a cluster approach when venturing overseas; and raise the profile of the Local Industry Upgrading Programme (LIUP) and expanding it to promote internationalisation." We need a paradigm shift, we need to promote partnership as a multiplier, and not a zero sum game.

In fact, as Mr Inderjit Singh had also said, we need to leverage on each other's strength, in order to grow. The SMEs, given their business instincts and acumen, can sniff out the business opportunities while the GLCs can also support with their know-how and process expertise. The GLCs, with their good brand name, can also pull the SMEs along while establishing a beach-head on foreign soil.

Madam, I urge that the Government also urgently facilitate outlets for these monstrous fishes and guide them towards the open sea. The movement of these monstrous fishes would stir the seabed, throwing up planktons and living organisms to feed the smaller fishes. In time, these smaller fishes will be able to grow, be able to fend for themselves and even establish their own pedigree, their own brand. I do not support the exodus of GLCs, but that GLCs should stick to their original reason for existence, and divest the non-core businesses at a reasonable price over a reasonable period of time. May I also add that any drastic movement may also upset the ecosystem in question.

I also agree with Mrs Lim Hwee Hua's point that we should focus on the GNP and not just the GDP. I am, however, also mindful that part of the GNP must also originate from the domestic sector. Hence, there is a need to find a place for our private sector, the SMEs and the MNCs, on the continuum between the maximum position of crowding out the private sector and the minimum position of non-interference. A place between the two where we can find the optimum. In a world of rapid changes, this continuum is dynamic, and so is the optimum point. Only when we look at the reason for existence can we then find the optimum point between the two extreme points. I submit to this House, Mdm Deputy Speaker, that unless we consciously and continually seek this equilibrium or this optimum point, we will eventually lose our private sector's creativity and competitiveness. It would be worse if the private sector allows their perceptions, whether rightly or wrongly, to fester and lead to a culture of cynicism. It may lead to an outward movement of not just capital, but also people.

May I suggest that we do not let the GLCs take the wind out of the sails of the SMEs, but to help them build and direct the sails to catch the wind instead. Perhaps the GLCs can take some of our SMEs under their wings and start a mentorship programme. Impart their experiences and know-how to the private sector and provide a springboard for our private sector to leapfrog the learning curve. The question, of course, is if both are for profit organisations, then what is in it for me? Why should the GLCs do so? I think besides being a good corporate citizen, GLCs can also profit by taking a minority stake in these companies. In turn, the stake money will enhance the capital base for the SMEs. When the SMEs are successful, they will then in turn give a return to the stake money of the GLCs. This process can also be vice versa where the SMEs could take a minority stake in the GLCs. It could be a win-win strategy. I also support Mr Wee Siew Kim's call for a bridge to be built between the GLCs and the SMEs, perhaps a forum as well and even his call for a business SDU. And I suppose, even if the business SDU can bring together some marriage of convenience, it would have served its role.

Another often heard feedback from the SMEs is the lack of support when venturing overseas. Can IE Singapore then act as a facilitator for our SMEs in linking up with our embassies, trade missions or even trade stations abroad, to serve as a launch pad for our SMEs' foray into the foreign market? Our embassies and trade missions are well placed to give an insight, at least, into the culture and local knowledge in these foreign lands. Just like foreign companies coming into Singapore can obtain one-stop information and help from EDB, could IE Singapore or any other Government agencies provide appropriate information and database to facilitate some of these overseas ventures? This would serve our SMEs in good stead, giving them a competitive edge with reliable support and good grade information.

If the GLCs have to compete with the private sector, let it then be the objective of bringing up the standards of our private sector. If there is a need for the GLCs to compete, let it then be out of a need and not greed. If there is a need for GLCs to compete, then let it be from without and not within.

Mdm Deputy Speaker, I would like to conclude by referring to the latest debate on stayers and quitters.

I have had opportunities to speak with many of our corporate citizens who are actually SMEs. These are corporations that have grown over the years. I have sought their permission to quote them. Some of them I am referring to are System Access Ltd, Technology and Apex Systems Pte Ltd and this company called Lindeteves Jacobsberg Ltd, which is one company that specialises in electronic motors, and they are the third largest supplier to Europe. For these companies that I have quoted, they derive the majority of their revenue, in some cases, 100% of their revenue outside that of Singapore. However, they are maintaining an office in Singapore. In fact, there is no compelling reason for them to do so, but they did. The refrain from these corporations was that Singapore is their own. This is the place where they have sunk their roots and this is the place where they would like their children to grow up in. They are here because their hearts are with Singapore. However, they also expressed that if the issues that were brought up by the EISC Committee are not properly addressed, then in the long term, there may not be a lot of stayers purely because it is no longer economically viable to stay in Singapore. Once they start to venture abroad, make their stake abroad, what may happen is in the process, they will start to lose touch with Singapore. And the heart stops where survival is choked. So when they leave Singapore for economic gains, they asked not to be blamed. Quitting is not a sudden decision, but it is a process that may lead to that decision.

In the light of these views, I support the Motion.