NEW CHARTER OF GOVERNMENT-LINKED COMPANIES

Order read for resumption of Debate on Question [27th August, 2002],

"That this House, taking into account the Report of the Entrepreneurship and Internationalisation Sub-Committee (EISC) of the Economic Review Committee and the press release by Temasek Holdings (Pte) Ltd on the new charter of the Government-linked companies (GLCs) and in view of the concerns of the private sector regarding GLCs, urges the Government to implement the recommendations of the EISC which define the new roles and positioning of the Government and GLCs in business and, in so doing, support the growth of private enterprise and entrepreneurship in Singapore.". - [Mr Leong Horn Kee].

Question again proposed. 1.55 pm

Ms Olivia Lum Ooi Lin (Nominated Member): Mr Speaker, Sir, thank you for allowing me to join in the debate today. I would like to declare my interests. I am the Group CEO and President of the Hyflux Group of companies, established in 1989 as Hydrochem (S) Pte Ltd. Hyflux has progressed from being a small establishment providing integrated water treatment systems to a membrane specialist company, listed on SESDAQ in January 2001.

From this perspective, I would like to share my thoughts as a Singaporean, as an entrepreneur and as a business person. This debate, I feel, has focused a lot on GLCs' predominance in the Singapore business scene. I would like to offer some business perspectives of GLCs. Compared with the average stated-owned enterprise worldwide, our GLCs are amongst the finest and best-run in the world. They are highly organised, transparent, accountable and profitable. From our nation's founding years, our GLCs were part and parcel of what made Singapore the success it is today. Indeed, our GLCs were originally the main engines of growth and development in many sectors, including infrastructure and industry. They provided the much needed employment and stability for our country and our citizens. For all these reasons, we, as Singaporeans should and must always be appreciative and grateful.

The big question is not whether our GLCs were the right engines of Singapore's original growth which, in many ways, I personally believe they were, but whether they are still the right engines for Singapore's future economic success in an increasingly competitive global arena. If they are, we need to define in which areas. If they are not, again, we need to define which particular areas and how we should move forward. If we sincerely believe that one of the most significant engines of growth in a new age economy is budding entrepreneurship and private enterprise, we need to examine whether our GLCs in various instances, are indeed crowding out and stifling these engines we need to support and grow.

The fact of the matter is that if truly provided with a level playing field, and Singapore entrepreneurs still cannot fight and beat the GLCs at contracts on home ground, and in their own field of expertise, it is unlikely that they would succeed against far more aggressive foreign players in a global market and vice versa. This same rule applies to our GLCs as well.

With that in mind, we must still always remember the war is out there, not here in Singapore. We need the Government to provide a level playing field and a good business platform for all, not only SMEs but also MNCs, GLCs, TLCs and NLCs. This is why I would like to congratulate the EISC for having thoroughly considered and completed the excellent report on Government in business. The recommendations are as comprehensive as they are diverse, and they have left almost no stone unturned. At the same time, they reflect a very serious grasp of the issues at stake, and propose solutions that are both practical and responsible. As such, I fully endorse the motion to implement the recommendations of the EISC. I would like to offer my compelling reasons why I fully support the motion, particularly at this time in Singapore's history.

First of all, there is an urgent need to quench the thirst of the local SMEs and private enterprises. Let me elaborate on my first point with an analogy of the desert, thunder and rain. We have just been through one of the worst patches in our economic history. The economic downturn has hit many enterprises in an unprecedented manner, especially among local SMEs and many are still hurting. If I were to describe to you the Singapore business landscape through the eyes of the business community, particularly the private sector, you will see a desert - a parched and dried up desert in which many are now thirsting for something real, something concrete, something to believe in again, and then to move forward.

Taking my analogy further, the desert has been caused by a multitude of factors, including MNCs following the exodus to greener pastures in low-cost manufacturing countries such as China. It has been worsened by global cost cutting and consolidation.

Let us move on to thunder before the rain. I would really describe the recommendations of the EISC as thunder before the long-awaited rainfall on our parched and drying desert of private enterprises. To the weary businessman and to the budding entrepreneur, these recommendations are indeed like thunder. I choose the word "thunder" with much deliberation. Thunder announces the onset of much needed rainfall to refresh and rejuvenate parched soil.

Let us move on to the rain. Unfortunately, to the sceptics and cynics, thunder may not always lead to rainfall where it is needed. Winds of change could indeed sweep away the clouds of promise to other areas. Local SMEs and the private sector in general are hoping and waiting for the rain. The rain that they are longing for is the implementation of the recommended measures. That is all that is needed - this window of opportunity - speaking as an entrepreneur, speaking for the private business community. All true blue business persons know how to capture the rain and to use it, store it and harness its productivity, and maybe recycle it. And I dare say, even bring some of this water in their journeys far and wide, searching out new lands of promise.

I have often heard the following: "If you have a good idea, a good product, or a good technology that can surely make money, do not let the GLCs and statutory boards find out about it. Or they will try to get hold of your technology or idea and compete with you in Singapore. And how to compete with them?"

Recently, I spoke to a friend to encourage him to start his own business. But his father discouraged him saying that in Singapore, he would lose to the GLCs. It would be better for him to either be employed by them or join an MNC.

The above views reflect the general perception among some Singaporeans, even though they are unjustified in many cases. In Singapore's drive to encourage entrepreneurship, this perception is counter productive but, unfortunately, real.

In a rapidly changing global environment, the private sector has a much bigger role to play in reacting to innovation and rapidly changing market trends. The Temasek Charter has refocused the role of our GLCs. It encourages the GLCs to focus on their core business, and expand globally. This is a much awaited move. This move will help convince the SMEs that GLCs would not encroach into the already highly crowded domestic market.

I endorse the Yellow Pages rule that Government agencies should not set up enterprises in areas where private sector players are able to play a part. Instead, the Government agencies should see these as opportunities to provide business for the private sector.

An equally compelling reason for the speedy implementation of the EISC recommendations is the urgent need to groom and grow our own local global champions. The truth is that in whatever global business you are involved in, you must be either number 1, 2 or 3, by sheer size and strength, or through agility and superior knowledge, failing which you have to redefine your niche in that sector and then strive to become number 1, 2 or 3 again. Failing this, you have to redefine or create a new sector in which you can excel. Failing all of the above, you need to admit defeat and bow out. Your guess is probably as good as mine how many and which Singapore companies will eventually emerge as global winners.

We honestly cannot predict whether it will be the GLCs, SMEs or larger private corporations that will emerge as champions. But we do need winners urgently, and I believe we should cast our net as wide as possible. Let the GLCs try, let the SMEs try, and let everyone try. We do know that market forces dictate that enterprises which respond the fastest to change, which can continue to renew themselves, will survive and thrive in this knowledge-based economy. We have to move fast or we will be left behind. We cannot afford to lose these few good years as we either capture our share of the market or risk losing our position. As aptly put by journalist, Mr Lee Han Shih, "Time is a luxury Singapore can't afford."

Take the city of Shanghai, for example. Anyone who has been to Shanghai over the last 3-5 years will see how rapid the development there has been. Private Chinese enterprises are moving with equal speed and resolve. A prime example is China's Hai'er Group. One of the largest household domestic appliance vendors in China, Hai'er is something of a local hero among economic reformers. It is known for its dramatic revenue growth and market-driven approach through its strong service network. Even major foreign players such as Dell and Compaq have to reckon with Hai'er as a keen competitor in the huge Chinese PC market. Traditional household appliance manufacturers such as General Electric and Ariston now have to sit up and take heed of a once unheard of brand, even in their home markets of the USA and Europe.

In Singapore, we have a very limited base of enterprises. Besides having to compete with established names, we now have to even compete with fast rising newcomers such as Hai'er.

In Singapore, we have always done things the Singapore way, and rightly so, simply because every country's journey on the road to success is different and unique. Singaporeans share an unusual heritage as a nation. We always trust the Government to look after us, do the best things for us and at the right time. Many have criticised this over dependency on the Government. Though most would not readily admit to it, we know that it is this relationship between the Government and the people that has made Singapore what it is today. It is precisely because of this that the business community has overwhelmingly come forward to work with the Government on the remaking of our economic future. What they are looking for is not simply hand-outs but for the Government to create more opportunities.

I believe that the time has come for the private sector to take on a more significant role in building corporate Singapore. I believe we are ready and we have to be, not only because private enterprise in Singapore needs this but perhaps, more importantly, corporate Singapore urgently needs to be relevant in the global business arena. More than ever before, the private sector needs the space to grow and, in return, I believe the private sector will not disappoint in taking up the challenge. The Singapore business community is urging the Government to implement the recommendations of the EISC speedily in order to help quench the dry ground. The community surely does not want thunder without the promise of rain. The rain which comes needs to be in sufficient volumes to penetrate the dry earth. It cannot be a passing drizzle. It must be sustainable and must last long enough for the ground to absorb it, and for new seeds of enterprise to germinate. Therefore, I urge the Government to implement the measures recommended fast. I believe that if the rain comes, we will all look back at this milestone and, in its place, find an oasis that has moved us along in our nation's journey to success.

Mr Ng Ser Miang (Nominated Member): Mr Speaker, Sir, thank you for allowing me to join in this debate. I declare my interest as an independent director of SMRT Corporation, a subsidiary of Temasek Holdings Limited.

The hon. Members of this House have debated eloquently on the two issues, firstly, the role of Government in business and, secondly, supporting private enterprise and entrepreneurship, as reported by EISC and its recommendations on Government in business. Sir, I think this must be set against the bigger picture of the remaking of the Singapore economy, and as we face squarely the challenges of the great uncertainty of the world economy and fierce competition ahead.

Sir, I believe that many of us in the private sector will agree with EISC that the Government should only be involved in business where it achieves its strategic objectives, such as managing critical resources, public policy objectives and developing new growth engines. And that such involvement should cease when the private sector has developed capability and is ready to assume such role.

I also believe that EISC has clearly defined what type of business the Government should be in and what it should keep out of, and therefore setting clear markers within which the GLCs should operate henceforth. EISC has adequately addressed the concern of crowding out private enterprise by the over dominance of GLCs. The private sector will be relieved to note that EISC has stated that the Government no longer needs to take a hands on approach and should encourage private sector to be in the forefront of developing new business ideas.

Sir, several Members of the House have spoken with passion on the considerable public unease and concerns over GLCs. Whilst some of these concerns are based on facts and some on perceptions, but whether facts or perceptions, they are real issues with the private sector, as we have earlier heard from Ms Lum. The EISC Report, if adopted by the Government, will certainly help to allay the major concerns of the private sector. It will give a lot of comfort to the private sector to know that they do not have to compete head on with GLCs in the domestic market.

The generic competition law to be introduced and an independent Fair Competition Authority to be set up by the Government will go one step further to ensure a level playing field and fair competition. However, I think we must all be aware, as businesses are aware, that a level playing field does not mean protection from competition - domestic, foreign or from GLCs. When there is money to be made, the Starbucks, the Ikeas, the 7-Elevens of the world will come in and compete against our home-grown coffee clubs, furniture and provision shops for their market share. The competition, whether from GLCs or others, will be keen, and if our private enterprises cannot stand up to this competition, they will perish.

On the other hand, notwithstanding competition from GLCs and overseas investors, our private sector has proven its resilience and ability to stand up to competition. Today, the SMEs are providing 70% of the jobs for our workforce. The challenge for our Government is to support the private sector and encourage the entrepreneurial spirit to flourish, so that the private sector will continue to be the pillar of our economy and will succeed in their efforts to expand overseas. At the end of May, Temasek's top seven listed companies accounted for 21% or $72 billion of the Singapore Exchange market capitalisation of $342 billion. The top

22 GLCs, as we have heard several times, contributed 13% to Singapore's GDP in 1998. Despite the many misgivings over GLCs, I would like to see the GLCs as one of our important assets, and a very powerful tool that the Government has, and can use and must use to expand our external economy. The Hai'er group in China that Ms Lum just mentioned is one of the state-owned enterprises that has been privatised. They are not only successful in the Chinese market itself but they have since expanded their manufacturing base to America. Sir, I think there are many of these examples around, and our GLCs can be the Hai'er of Singapore as well.

Skills, core competency and financial muscle matter most in venturing overseas successfully. It is a tough world out there, and for those of us who have been overseas, we all know that there is really no level playing field. It is true that GLCs have their fair share of failures expanding overseas in the past. There are lessons learnt, and it is part of business. If we expect our GLCs to be the driver for our external economy, we must also expect a fair share of failures from them. For GLCs to successfully lead our international expansion, they also must have the same entrepreneurship spirit and the ability to take risk, which means, to accept some failures.

Since the publication of the EISC report, Temasek Holdings has responded with a new Temasek Charter. Some have felt that this new charter may not fully reflect the recommendations of the EISC. In particular, it is silent on divestment of non-strategic business. I am sure that if the Government accepts this report, and I am an optimist, it would then become the Government's responsibility to ensure the compliance of GLCs to operate within its new role. I am also sure that Members of this House will make effective monitoring of the work of GLCs and also of its divestment of non-strategic business.

Sir, hon. Members have commented that there is a need for greater transparency for GLCs. I believe that GLCs do have a corporate image problem, as they seem to ring-fence themselves. I think perhaps it would help, especially for listed GLCs, to become good corporate citizens, to be more involved with community, for example, to actively support sports, arts and culture. Maybe it is a good start with football or badminton. Senior executives of GLCs can also follow the footsteps of those in the private sector and become volunteers in community service.

Sir, in January this year, as Chairman of Network China, I led a business delegation to Beijing, Qingdao and Jinan to explore business opportunities arising from Beijing hosting the 2008 Olympic Games. The delegation consisted of 72 companies, 100 businessmen and women and senior executives from both the private sector and GLCs, with staff support from IE Singapore. Some of the companies went belong to the ST Group. Some of those from the private sector were BreadTalk, Hyflux. There were engineers, there were construction firms. We were introduced to many projects and potential, eg, in infrastructure, transport, communication, environment protection. While there are plenty of opportunities, the delegation also found that many of these potential projects require a huge capital investment or capability and skills beyond that of a single company. Delegates themselves and, in some cases, with encouragement from IE Singapore, form partnership and pool resources to compete. This is indeed a good example of GLCs and private sector companies working together, with IE Singapore acting as a catalyst. When I see them working together, I do not really see a great divide between the GLCs and the private sector. I see a group of Singaporeans working together, sharing the common objective of fighting for business opportunities.

I understand that these companies continue to network and work quite closely together, even after their return to Singapore. Sir, the culture of partnership as envisaged by EISC is important to Singapore companies if they wish to compete successfully overseas. I agree with EISC that IE Singapore and SPRING have important roles to play to identify and catalyse the development of specific industry classes for our international expansion.

Sir, I support the Motion.

Ms Indranee Rajah (Tanjong Pagar): Mr Speaker, thank you for allowing me to participate in the debate. I have been sitting here in my corner in Parliament listening to the debate as it goes along. And I am not sure that this debate about GLCs versus private sector is really the correct issue. The Motion is that, having regard to the Temasek Charter and the EISC report, the Government should implement the recommendations in the EISC report. The way the debate has gone seems to suggest that there is some inconsistency between the two. Frankly, I see no inconsistency. The EISC report recommends that Temasek Holdings scale up their core businesses, not enter into unrelated business, that they should expand internationally, explore divestment, attract world-class talent into the GLCs, follow the Yellow Pages rules, do not corporatise or privatise the regulatory functions, conduct mandatory periodic housekeeping, outsource Government's functions and define specifications more broadly to provide opportunities for SMEs.

The Temasek Charter, as far as I can see, is quite consistent. It talks about having Government ownership and control for the critical or strategic businesses or areas. It talks about going international and regional, when necessary, to grow, and it is open to partnering other companies to regionalise or internationalise, and it also talks about divestment. So, I do not see any inconsistency between the two reports.

So, what is the fuss about GLCs versus private sector? As I understand it, the thrust of the arguments appears to be that (1) Government should get out of business; (2) GLCs are squeezing out the local companies because they are bigger and have more financial muscles; (3) GLCs have more connections, they have the old boys' network, and all things being equal, contracts will go to them; (4) GLCs are sucking up all the talent; and (5) GLCs are inefficient. Now, when you make an argument like that and you put forward suggestions to remedy these evils, you have to have an inherent consistency in your argument. And I have some serious difficulties with the arguments that have been put forward in support of these arguments. If you run through this list and you wonder why its sounds very familiar, that is basically because it has a Star War theme about it. The GLCs are the evil empire and the private sector is the struggling rebels, I suppose, fighting against the evil empire.

Let me just examine a few of these propositions that have been put forward.

First, it was suggested that GLCs are sucking up the talent. If we did not create GLCs, we would have a larger pool of entrepreneurs and the rise of GLCs has led to the death of the entrepreneurs and monopoly of top brains by the civil service. But I do not know about you. I refuse to believe that the only brains here are the civil service and that the private sector is completely stupid. It cannot be because half the time in Parliament, we are always telling the civil service where they have gone wrong. So it must be that on this other side of the House and in the private sector, there are some smart people. I do not think that the private sector should sit down, wring its hands and lament that the other side is, "They so smart." You should be sitting down and saying to yourself, "I no stupid." It is over the question of attitude. It is a question of approach and it is a question of how you view the competition.

Mr Leong Horn Kee suggested yesterday that perhaps we should have more of the Government leaders in business and who knows, if some of them had gone into private enterprise, where would we be now, he asked. Perhaps, if SM had become a top lawyer, where would we be now? I am not sure about the others, but I can tell you, we would not be a sovereign independent state and we would not be discussing PSA Corporation because it would be called Tanjong Pelepas!

So I think what we really need is talent across the board - in Government, in GLCs, in private sector, SMEs, wherever it is - but you need talent everywhere. It is not a question of challenges being located in a certain place. The private sector should have faith in itself and believed in itself, and we do have a private sector that is good and intelligent, and it should not adopt the attitude that, "Oh, I can't compete", just because somebody else has more strength. Competition is all about finding out how you can go ahead and compete against others.

The other suggestion that was put forward was that Government should help by, through existing GLCs, taking a minority stake in new firms and should sell off its shares once the new business is on track. I examine this suggestion rather carefully. You want them to put in money or to take a minority stake, what you are basically saying is, we want Government money but you do not want them to have any control. You do not want them to have any say. And you say that they should sell off its shares once the new business is on track. In other words, give you the money, and once we are profitable, go away. I do not think that is very fair either. It is definitely not the basis on which investors put in money through any company.

More than that, I think we have to realise that if we want the Government to put money in through an existing GLC and hold shares in the company, you become a GLC too, because you become a subsidiary. So, it does not quite work that way. You have to go according to the rules of how business is conducted. The next comment that was made was perhaps you should have more private sector representatives appointed to the GLC boards. But, then, on the other hand, the argument was Government should get out of business. So I do not understand which is it. You want them in business or you want them out of business. You want them in business, then, you should allow them to run the companies the way they want to. If you are saying that you should be appointed to the GLC board, that means you want the GLCs around. What you are really saying then is you want the GLCs, you want to be on their boards, and you want part of the old boy connection or network. That is really what is being said. Again, I have a certain problem with the logical consistency of that.

Then, it was suggested that they were inefficient. Mr Inderjit Singh said that our GLCs are late in going global and the consequences of it can be seen in the failure to compete successfully and in being taken for a ride in certain high profile acquisition transactions. On the other hand, we have also heard that all the top talent is going to the GLCs. So all the top talent is working hard to produce this inefficient result, in which case I do not understand why do we want them in the first place. It cannot be right.

So when you are going and competing, you have to make a distinction between the local market and the foreign market. When you are competing in a foreign market, it is not a question anymore of us competing against the GLCs. It is a question of how all of us can compete against the foreign companies. If the small companies in Singapore are not able to compete by themselves, you cannot complain about the GLCs because they are bigger, they have more financial muscles, and they are more likely to be able to compete globally.

The other suggestion made was that they should form clusters and bring local businesses along, which again means you want the GLCs but you want them to bring you along. And that means that there is a certain amount of good that they can bring to the economy. You see, at the end of the day, the local market is too small. The local market is too small for both the GLCs and the private sector to be fighting over the limited market that we have here. It is not a question of GLCs versus private sector. It is about Singapore Inc versus the rest of the world, and it is something that we have to do together. There is a role for the GLCs simply because of their connections, because of their financial muscles, but there is also a role for the private sector and the SMEs. It is a question of how each one can find its place in the international market and make our mark regionally, because the local market is just too small. This is not to say, of course, that I do not have issues with the EISC Report. What I am saying is that, as far as the Temasek Charter and the EISC Report are concerned, they define a role for the GLCs and the way business should be done in Singapore, and I heartily endorse that.

But one thing that I did notice about the EISC Report which was not highlighted was the issue of cost. A lot of Singapore companies have complained that they have difficulty in competing because of cost. Some of the costs are necessary. But I think that it is possible for the Government and Ministries to review their rules and regulations to see how we can cut down the cost of doing business in Singapore.

Two examples. One is the recent PTC regulations for private bus operators. When I looked at the news release from the PTC, they said that SBS and TIBS have a duopoly. They felt that there should be more competition in bus services. And they said that, in introducing competition to feeder services, certain principles should be observed. First, the new operator and incumbent should compete on equal footing; second, the regulatory framework would not be as tight, and, third, their role will be one guarding against anti-competitive behaviour. But, of course, what they do in the new rules and regulations is that they stipulate certain minimum standards for the private bus operators, and, that is, the entrances and exits must have a minimum of 1.2 m and installed with safety device, and the first step height must be not more than 36 cm from the ground, whereas for most private buses, the first step is 42 cm from the ground.

When you make regulations like this, you immediately make them uncompetitive. Because in order to comply with your regulations, they are going to have to buy new buses, or adapt the existing ones, which is not such a good idea. As I understand it, the ones that satisfy the rules are the continental ones, such as the Volvos, which cost about $250,000, which are about $50,000 or $100,000 more than the Japanese models which are currently used.

When you are making a rule and you say that you want somebody to be competitive, yet you make a rule that immediately makes them uncompetitive because they have to buy these buses, what do you think will happen to the fares? They have to pass the cost on to somewhere. So that is the first example.

The second example is the SBF charges. I had asked the Minister previously what was the reason for making such charges mandatory. The answer was that it was SFCCI's recommendation as there was an earlier practice of voluntary membership and it had not been effective, and compulsory membership would ensure that the SBF had a strong membership base and the mandate of the entire business community.

I read the Today paper on 22nd August 2002 which said that about 8,000 business units had paid, but 16,600 businesses are delaying payment and a few thousands are appealing for their fees to be waived. That does not look like a mandate to me. It looks an awful lot like opposition. That is because you are just adding cost on to doing business. If you use the $500,000 paid-up capital criterion, it is like a blunt instrument. Because in many companies which do not do active business, like investment holding companies, they have to pay. I imagine that the GLCs have to pay as well, but they do not need the SBF. So it is cost like that which we are layering on and we are making the business community bear this cost and, at the same time, saying that they have to be more competitive.

I would urge the Government and Ministries to review their rules and regulations to see how they can make businesses more competitive, in terms of cost. And at the end of the day, it is not about GLCs versus private sector. It is about how we, Singapore as a whole, can go out and get more of the international pie.

Mr Leong Horn Kee (Bishan-Toa Payoh): I want to clarify a point made by Ms Indranee. I did not suggest that SM should become a top-notch lawyer. I said that he would be, if he did. In fact, he would give very stiff competition to other lawyers, if he did. Everybody is glad that SM had decided to become a political leader to lead Singapore to become what it is today.

Mr Gan Kim Yong (Holland-Bukit Panjang): Mr Speaker, Sir, I have the benefit of working in the civil service in the early years of my career. And now, I am working in a private sector company which was once upon a time a GLC, until late 1980s, when Temasek divested NatSteel. Temasek's stake in NatSteel now is less than 10%. Therefore, I have the benefit of looking at the issues from many different angles, from the Government, from the GLC's point of view, and non-GLC's point of view, as well as the process of the transition.

Sir, the issue of Government's direct involvement in business has been a regular topic for debate in this House. The question has been focused around whether the Government should play an active role in owning and operating businesses, or should it stay out of business and focus instead on macro economic policies. Many have argued that the Government's presence, through the GLCs, may have an adverse impact on the ability of the local small and medium enterprises to develop and mature. The sheer size of the GLCs meant greater economies of scale and this coupled with the availability of Government funding may have given them an advantage in competing with the SMEs which have to be run commercially and with limited resources. Many even suggested that the GLCs have scooped up whatever talent that was left after the Government has taken the first bite. After all, they take up a big chunk of the capital market in Singapore and contribute significantly to our GDP.

Sir, we must take a balanced view. We must first recognise that Singapore's economy is somewhat unique in many aspects. We do not have a huge domestic market. We do not have a large pool of talents. There is little room for error when it comes to economic development and industrialisation programmes. In this respect, the GLCs have played a pivotal role in spearheading our economic progress in the past.

However, the recent economic slowdown has put additional pressure on our SMEs and this has once again rekindled the debate on the role of GLCs. It is therefore timely for the EISC to release its findings and recommendations on the role of GLCs. Its report serves not only to remove some of the scepticism and reservation people may have on GLCs but also as a guide post for Government's future involvement in business.

Sir, I would like to share my views on three specific aspects in the report. Firstly, I support the Committee's recommendation that GLCs should aim to be international players. They must play a key role in developing our economy's external wing. I am not saying that private enterprises cannot become global players. In fact, there are many examples. Creative Technology is just one of them. But given the size of GLCs, as well as their financial and management resources, they are well positioned to compete internationally and have a better chance of eventually becoming global players. We do have some success stories. Singapore Airlines, for example, is not only a global player but a global leader in the airline industry. SingTel and DBS Bank, on the other hand, are fast becoming regional players and, hopefully, in time to come, they too will attain the same global standing as SIA in their respective business sectors.

It is important for us to develop our external wing quickly. As technology advances, the world is becoming smaller and more competitive. Geographical distances and national boundaries are no longer effective barriers. Soon, we will not be competing with immediate neighbouring countries any more but, instead, all of us will be competing against emerging economies, such as China and India. If we do not develop our external wing quickly, we may miss the opportunities that these fundamental shifts in world economies offer us.

Developing an external wing will not only give us access to global business opportunities but may also help us in attracting foreign talents. For example, I am sure that, with SIA's international standing, it would have no problem attracting the world's best talents in the airline industry to work for them. Even if they are not physically resident in Singapore, their expertise will be available to us through our global network. Instead of directly recruiting foreign talents, GLCs can consider partnering global players through mergers and acquisitions, or through strategic partnership, and as a result bring their management talents within its group.

Given the urgency of developing an external wing for Singapore, we must impress upon the GLCs their role in this respect and that they must set their sight on global business in the long term. In fact, I would like to urge each GLC to go beyond mere mission statements and to formulate a clear road-map and broad timetable to transform itself into global players over the next 5-10 years. Granted that some of these things cannot happen overnight and the timing may not be within our control, it is still important to set our major milestones to demonstrate our intent and commitment.

Secondly, I think GLCs must share in the responsibility of helping the local small and medium enterprises. I am glad the Committee has recommended the encouragement of a culture of partnership among GLCs, MNCs and SMEs. However, I feel that GLCs must go one step further and go beyond mere partnership. Given its dominant position in our economy, they should adopt the leadership role by showing the way for our SMEs to upgrade and transform themselves to remain relevant and competitive. Furthermore, I would urge them to also consider providing direct assistance to SMEs, whether be it in the form of financial investment, technological know-how, management expertise, or otherwise. In particular, as they venture overseas, SMEs would need a lot of hand holding in unfamiliar environment which is often hostile. GLCs which have made inroads into overseas markets will be in a good position to help.

One of the main concerns of the local SMEs is that GLCs tend to inadvertently squeeze them out by their sheer size and might. Such concerns may well be a perception issue. It will surely help to correct this adversarial approach if GLCs can go the extra mile in helping SMEs, especially those which have the potential of becoming a major international player one day.

The GLCs need not look upon this as national service. The truth is that many of these SMEs are suppliers or contractors of GLCs. It is in the commercial interest of GLCs to ensure that they have strong and competitive suppliers and contractors that can support them in their effort to globalise. They are strategic partners and they are interdependent. They will play a crucial role in the GLCs' successful transformation into global players.

Thirdly, while GLCs go through its restructuring and repositioning process, they must do so cautiously. Success or failure of a good plan often depends on its process. While it may be inevitable that some GLCs or their subsidiaries need to be divested or, in the worst case, liquidated, the decision must take into account not only economic factors, but also several other factors, including its repercussion on the supporting industries that may depend on it to survive, especially in this difficult period. Some of the restructuring process may also entail retrenchment leading to even higher unemployment rate. Therefore, while the restructuring process is necessary, the GLCs must manage the process carefully to minimise disruption. This is especially sensitive at this time when unemployment is still high.

It is also important for GLCs to communicate the process carefully to the stakeholders, not just the shareholders, but also the employees, customers as well as suppliers, and use their best efforts to help them adjust to the changes. In this way, it will minimise misunderstanding and ill feelings.

Mr Speaker, Sir, the recommendations of the EISC have been very comprehensive and I must take this opportunity to congratulate the Minister of State, Mr Raymond Lim, for the Report. Assuming that the Government adopts the main recommendations perhaps after some refinements, I would like to urge the Government to implement them as soon as possible and to take great care in communicating to the affected parties to minimise any adverse effect that may negate our effort to restructure our GLCs.

On this note, Sir, I support the Motion.

Mr Heng Chee How (Jalan Besar): Mr Speaker, Sir, thank you for giving me this opportunity to join in the debate.

Sir, the key point of our debate is whether the Government should be involved in business, especially in areas of business where the private sector is already capable of providing those services. If that is the focus of our debate, then I am utterly puzzled why NTUC cooperatives were brought into the discussion. This is because NTUC cooperatives are not Government-linked companies. The NTUC cooperatives are not owned or managed by the Government.

Perhaps, this erroneous perception may have arisen from the fact that some NTUC leaders are MPs of the ruling Party. But if we go on this basis, then we also have the ruling Party MPs in this House who work for large companies and business groups in various sectors. Surely, we will consider it absurd to call their companies Government-linked.

Sir, I feel strongly that parliamentary debate must be based on correct facts. Only then can we have proper and useful debate. If we know that a particular view, even if it is one that is widely held in the public mind, is an erroneous one, then we must seek to correct it rather than to repeat it and to add to the misunderstanding. Leadership is not about running ahead of the mob.

Given that NTUC cooperatives are not GLCs, then I would suppose that their inclusion for mention in this debate must be because of a perception that they can be big, or that there are NTUC cooperatives in different areas, or that NTUC cooperatives may have unfair means of edging out smaller competitors.

Let me take each argument in turn. If we say that the problem with NTUC cooperatives is that some of them are big - as if bigness is itself a sin - then we have to broaden that to include all big players in all economic sectors. For example, our property sector is dominated by a small number of big players, TLC and private sector alike. So, what are we going to do to level that playing field for the smaller developers? But that discussion is for another time, because the Motion today is not about curtailing potential excesses by big business but on the role of GLCs in the Singapore economy.

Or, perhaps, the misgiving about NTUC cooperatives is that they are present in a number of different sectors. We make no apology for this, because NTUC cooperatives are set up in areas where the common man needs value-for-money services for everyday living. And wherever NTUC cooperatives are present, they have the effect of moderating prices and improving quality through providing benchmarking.

By our sincerity and hard work, we have earned the trust and patronage of our members and customers. Our cooperatives compete for the support and business of our customers every business day, against strong competition from both local and foreign players. Our members and customers know that NTUC and NTUC cooperatives care, that we do not take them for granted and that we are not some cold, opportunistic, profit-crazy outfit out to squeeze the last dollar out of them. As Mdm Halimah Yacob said yesterday, for several years now, we measure the performance of NTUC cooperatives by a set of social indicators. And the NTUC publishes this report card each year. Our cooperatives also publish their social indicators in their annual reports, and table them at their annual general meetings.

Sir, we have seen the excesses of the free market, in the wake of globalisation. It is not just the Enrons or the barons of bankruptcy. We are seeing banks in free-market economies not wanting to provide services to the low income, or those living in small villages in developed countries. We see tens of millions not covered by medical insurance, when it is left to the private sector. In the drive to maximise shareholder value, millions of workers have been retrenched around the world. This has evoked a response, a backlash. Workers are disenchanted. Unions and NGOs campaign against globalisation.

What should be our response? I believe we should adopt the free market and embrace globalisation. But we would have to instill a greater sense of social responsibility. How? By encouraging the small men to fight back and compete well. This they can do through cooperatives. And cooperatives can act as the counterweight against unbridled greed. This then is the big difference between our cooperatives and private-sector business. Private-sector companies are profit-driven, to return the highest value to their shareholders. This is their mission. Our cooperatives are driven by the goal of providing the best value for the customer. That is our mission. We do well in order to do good. Today, this role is growing in importance.

In a recent survey, 74% of Singaporeans surveyed were very satisfied with the role that NTUC cooperatives play to moderate the cost of living for them. These Singaporeans and households will want to know the rationale behind any proposal that seeks to deny them these savings and the convenience that they enjoy. So, unless moderating prices and creating value for money for the common man is something objectionable, then I cannot understand what the problem is. In any case, if we say NTUC cooperatives are in different sectors, we must also note that it is not uncommon for business groups to have businesses in different sectors. For example, if we look at property developers again, they may also have subsidiaries that provide for finance, maybe even make drinks.

The final possibility may be that there is a perception that NTUC cooperatives have special privileges that guarantee them choice of location or other perks. But the fact is that all NTUC cooperatives have to compete for all the business that they get and all the business locations that they do business in, just like all their competitors. And, just as they have been successful in some bids, they have also lost other bids. NTUC FairPrice, for example, lost the bid for store space at Changi Airport's Terminal 2 to a competitor during a recent re-tender exercise. It was outbid. The lessons are, firstly, that neither the Government - in this case, the CAAS - nor any private-sector property owner can be expected or will give any special consideration to NTUC cooperatives; and, secondly, that what replaces a NTUC FairPrice store is not going to be the mom-and-pop shop, but another retail chain, most possibly a foreign-owned one. So, let us face facts and not delude ourselves.

All Members who spoke want to develop local enterprise. I share that same sentiment. But I must point out that NTUC cooperatives or - as some Members have called them - NLCs, they are local enterprises, and they are successful local enterprises. So, why do we not support them? Some Members have bemoaned the lack of capital for local enterprises. Perhaps, our local enterprises can look at the experience of the NTUC cooperatives and see how they have raised their capital. Let me give some examples. The early cooperatives faced much more difficulties than SMEs today in finding capital. So, union leaders aggregated the funds the hard way - persuading workers, one worker at a time, who have very low incomes - to buy shares in these cooperatives. That was how NTUC Welcome, the predecessor of today's NTUC FairPrice, started. Today, FairPrice is a household name in Singapore, and perhaps it is the only local supermarket chain that can withstand and compete against foreign supermarket retailers. NTUC Income was started the same way, collecting a few dollars from each union member. So, too, NTUC Comfort, which is now divested and listed on the stock exchange as the Comfort Group.

Some Members have called on NTUC cooperatives to help small businessmen. And they have. As Mdm Halimah Yacob explained, Denticare is indeed a cooperative of dentists. They share the revenues. NTUC Foodfare operates food courts, but the people who run the stalls are the hawkers themselves, who rent the space. NTUC Income uses its website to provide a matching service between handymen and homeowners, between tutors and school children. NTUC FairPrice, NTUC Healthcare, NTUC Childcare cooperatives operate franchise schemes in order to share opportunities with the business community.

Sir, I believe that the crux of today's debate is about fair competition and how to better promote it. This is important. This must be our focus, and we should keep our focus. Listening to some speakers, one may get the impression that behind the phalanx of accusations lie local businesses scared of public-sector GLCs because they are big, angry with competition in the private sector because they are big, and then suspicious of one another, not quite wanting to work together, just in case the other one might grab the secret formula and become big. This will not do us any good. Singapore - if we look at our natural endowments - is indeed a SME among nations. And we have no one to complain to. But we got to where we are today not because the international stage is a model of fair play, not because the big boys imposed a moratorium on themselves to give us a leg up, but because we as a country took the hard decisions - and I would say some rather unconventional ones relative to the received wisdom of their time - and worked hard to build the necessary capabilities, capacities and attractiveness in order to compete well.

If we look at the NTUC cooperatives, how did they get to do well? By following the advice of Dr Goh Keng Swee, ie, employ good professional managers. There is no reason why our SMEs cannot follow that same formula - pool resources and employ professional managers. That was very good advice that local SMEs pooling resources can note.

Sir, I hope that this debate can help focus Singaporeans' attention on what is fundamental, namely, on how to help SMEs strengthen their leadership, vision, competitiveness and resourcefulness, rather than confuse the debate with red herring. Life is not about avoiding competition or defining away the competition. And to reinforce any such tendency would indeed be the ultimate disservice to our SMEs and to all Singaporeans.

Mr Speaker: Order. I propose to take the break now. I suspend the sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended at 3.00 pm until 3.20 pm. Sitting resumed at 3.20 pm