Sing a song of SingTel

April 5, 2001

The architect of the bid for Optus knows he has some explaining to do, Eric Ellis reports from Singapore

SINGAPORE Telecommunications chief executive Lee Hsien Yang is in Sydney this week on a mission - to convince corporate Australia that what it needs is a good dose of Singaporean-style business culture.

The company he runs has made one of the biggest ever takeover bids in Australian history, a $17 billion offer for telecoms giant Optus Communications.

But investors require convincing that it's a good idea. Since the bid was announced last week, they've shaved $8 billion from the combined value of SingTel and Optus shares. Shares of Singtel, 78 per cent owned by the Singapore Government, have fallen to a record low. If SingTel buys Optus, those shares will be listed in Australia.

So, today, Lee will explain his complex offer and address rising disquiet that Singapore Inc operates in a very different way to corporate Australia.

It could be a tough job selling Singapore-style capitalism in Australia.
Its view of Asia - particularly after the recent financial crisis - is sceptical, to say the least.

And Optus is Lee's third attempt in a year to secure a big regional asset after Malaysia and China kept SingTel out of their telecoms markets because of concerns about its government links. After rejections in Beijing and Kuala Lumpur, why should Australia be any different?

The Singtel posse will claim that Singapore adopts the "world's best practices" of corporate disclosure and that the city state's business community is as open as the best. They might also offer that theirs is a culture that works: tiny Singapore is one of the world's richest countries.

True, alongside its opaque ASEAN neighbours, Singapore is a paragon of corporate virtue. It survived the Asian financial crisis battered but intact and is now rebranding itself as the "Wired Island" of e-opportunity. But Singapore still has some way to go before it attains even Australian-style business procedures, let alone world's best practices.

Singapore's very different style starts at Lee's own family, headed by his father, the widely respected phiIosopher-king Lee Kuan Yew. For most of the past 40 years, Lee Kuan Yew has headed a virtual one-party state. Today, he's the "Senior Minister" who also chairs the state investment company, which manages the national wealth.

His family are high achievers, indeed. The elder of his two sons, Lee Hsien Loong, is deputy prime minister and runs Singapore's de facto central bank.

His younger son, Lee Hsien Yang, runs partly privatised SingTel, in competition to StarHub, Singapore's second carrier, which is chaired by his sister-in-law, Ho Ching. She also runs the country's biggest technology company, which has major interests in leading property and finance companies. Lee Kuan Yew's wife, Kwa Geok Choo, and his youngest daughter-in-law, Hsien Yang's wife Lim Suet Fern, are successful corporate lawyers.

This litany of achievement doesn't mention Lee Kuan Yew's two brothers, one of whom was a director of one of Singapore's biggest banks, while the other was a shareholder in one of the country's biggest stockbrokers - in turn controlled by the company chaired by his nephew's wife, Ho Ching.

They do things differently in corporate Singapore. Take last year's prospectus of SPH AsiaOne, the internet division of the country's print media near-monopoly, Singapore Press Holdings, as a study in Singapore-style transparency and corporate practice.

The prospectus's 208 bound pages carry the imprimatur of blue-chip names like Citibank, ING Barings and Ernst and Young. It's an official document filed into a legal system held out as Asia's most reliable.

SingTel's chairman Koh Boon Hwee, a man integral to the Optus bid, is an AsiaOne director. Page 94 of the prospectus documents his business record. It is so extensive that it spills over two pages. Koh is listed as holding some 46 current directorship, 47 if you add AsiaOne. Some 71 boards are listed as "past directorships". And this doesn't include bodies such as the Singapore-US Business Council which he sits on, or the various cultural bodies.

University of London educated and a Harvard MBA, 50-year-old Koh is one of Singapore's quintessential safe pairs of hands. At SingTel, he provides the gravitas still lacking in the younger Lee. In company press briefings, Koh sometimes takes over from Lee in explaining the finer points of high finance.

Koh rose as the managing director of Hewlett-Packard Singapore. HP's status in Singapore illustrates the very essence of this dynamic economy - a comfortable, reliable place for multinationals to transact business in an unstable region. To HP, Singapore delivers Asia as Asia Lite, and HP reciprocates with a massive investment.

(Local cabbies are more likely to know the location of HP's Singapore head office than that of Parliament. That explains the position of politics in the local philosophy but it better explains Singapore's economy. When people like John Howard talk about preventing Australia becoming a branch office economy, it is supra-national relationships like that between Singapore and HP they might be thinking of.)

Corporate governance is a subject close to the urbane Koh. He also chairs Singapore's government-appointed Corporate Governance Committee, a body convened to make Singapore a better place for business.

Koh is a busy businessman, but if you've got the energy in Singapore you can sit on as many boards as you like. Singaporeans know that, because Koh's Corporate Governance Committee recommended in November last year against any upper limit on directorships for - as Singapore's Straits Times described it - "the simple reason that different people have different capacities".

Did Koh, as a beneficiary of that recommendation, distance himself from that decision, as is the accepted practice in Australia? Koh did not comment on that, but he did say that Singapore's system is equal to that of Australia.

ANOTHER AsiaOne director is Tjong Yik Min, president of Singapore Press Holdings, which publishes 11 out of Singapore's 12 newspapers, led by the pro-government Straits Times. (The other paper is published by the state-owned television broadcaster).

(SPH, SingTel and Singapore Airlines are three pillars of Singapore Inc, and people such as Tjong and Koh form part of an elite power nexus, in which the companies and their offshoots share common directors. It is also common in Singapore for serving government officials to be directors of public companies.)

The career of Tjong, 47, rates a paragraph in the prospectus, with a CV outlining a life spent mostly in the public service. He was a systems engineer in the Defence Ministry in 1976 and in 1993 became permanent secretary of the Communications Ministry, which regulates telecoms.

But the prospectus omits crucial information about Tjong's career that prospective shareholders might've considered germane.

It doesn't say that from 1986-1993 he was the director of Singapore's secret police, the Internal Security Department. As director he led a sinister 1987 crackdown called Operation Spectrum, which targeted church and social workers suspected by the Government of being involved in an unproven "Marxist conspiracy" against it. Tjong's ISD detained 22 people without trial, some for up to two years. He received the public administration medal in 1988 "in recognition of his public service".

Like Koh, Tjong is a director of Singapore Airlines (SIA) - while the prospectus also notes that he is a director of Singapore's Civil Aviation Authority.
Transparency issues dog SIA after the Taipei crash last year that killed 82 people, including many non-Singaporeans. Aggrieved relatives won't find any information about it on SIA's website.

But corporate governance and transparency are the buzzwords du jour in Singapore's instinctively guarded business community. This clubby society, often discomfited by criticism of its inner workings, has been told by the Government to smarten itself up, and this week Singapore hosted a region-wide conference on corporate governance.

THE message is still to fully sink in. Corporate Singapore doesn't employ too many investor or press relations officers, because it has never really needed to. Readers don't see much in the quasi-official press that challenges the status quo. The few press officials who do operate often go "off the record" to whisper "no comment".

A questioning local media culture doesn't exist in Singapore - unless directed at government opponents - because the media has been subjugated to Singapore's heady notion of nation-building. Investigative reporting is discouraged, and efforts by the foreign media to critically report Singapore have led to the gazetting of publications like the Asian Wall Street Journal, Time and the Far Eastern Economic Review, often combined with crippling lawsuits and restricted circulation and advertising.

MANY are the subjects deemed off-limits in Singapore, among them the extent of the Lee family's business interests and the investments of the secretive Government Investment Corporation, which he chairs. And any attempt to examine such topics invites, if you are Singaporean, exclusion from the national gravy train - or, if you are a foreigner, expulsion.
SingTel corporate communications officer Ivan Tan cited recent surveys conducted by Singapore's Business Times newspaper which praised the company's high level of disclosure. Business Times is owned by Singapore Press Holdings.

A Business Times journalist covering the transparency beat recently wrote to me in an e-mail that "in Singapore there is a lot of encouraging things being said in public but when it comes down to it the execution falls somewhat short. One could say that the rhetoric and public noises are promising, but the practice smacks of `going through the motions'. That said, things are moving in the right direction."

Banks and brokers have been slow to fill the breach. Rare is a corporate stoush where cranky shareholders call errant directors to task. Singaporeans like to think that's because they operate such a squeaky-clean system, and generally they do. But it is also true that institutions keep their collective head down lest they be excluded from valuable business in one of Asia's more government-controlled economies.

Flavia Cheong, Aberdeen Asset Management fund manager, says Singapore's standards are a lot better than they were. "It got a wake-up call after the financial crisis. It realised that international investors didn't have to invest in Asia if they didn't think it was safe to do so."

Cheong says Singapore has a lot to learn from Australian corporate practices, and she sees the SingTel bid for Optus as much more than a takeover. It's more like part of a national experiment to see if Singapore can embrace the rigours of globalisation. "They are still learning about transparency and how to cut it outside Singapore," Cheong says. "It will be very interesting to see how they adapt to Australia's rather more robust standards."

 Eric Ellis is a Singapore-based columnist for BusinessWeek and Time.