July 14th 2001

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Articles from this issue:

COVER: Singapore's economic lessons for Australia

Canberra Observed: Electoral map shows uphill battle for Coalition

Falling fertility debate reignited

Dissenters highlight dangers in UN report

Cloning: how far will states ban go?

Keep the single selling desk for wheat

The Media

Straws in the Wind

Letter: Export figures disputed

Minister resists competition push

Mass destruction in the future

Manufacturing and the sinew of war

Is corporate cost cutting becoming lethal?

French applaud 35-hour week

Books: Colonial Consorts, by Marguerite Hancock

Books: The China Threat - How the People's Republic Targets America, Bill Gertz

Letter: Barley story wrong

Letter: Trade, US-style

Letter: Riddle solved

Books promotion page

Singapore's economic lessons for Australia

by Peter Westmore

News Weekly, July 14, 2001
The proposed Singapore Airlines' take over of Air New Zealand, which has a controlling interest in the Australian domestic airline, Ansett, coupled with Singapore Telecommunications' $3.4 billion takeover of Optus, Australia's second largest communications company, saw Qantas Chief Executive Geoff Dixon accuse the tiny island state of Singapore of "imperialistic tendencies".

Australia has pursued competition reform policies along the US and British lines, resulting in the current airlines mess. Meanwhile, government-run carriers like Singapore Airlines - which Mr Dixon admits is "extremely well run" - are geared to building their national economies.

Singapore Airlines' takeover of Air New Zealand is subject to the approval of both the New Zealand and Australian Governments, while SingTel's takeover of Optus is subject to approval by Australia's Foreign Investment Review Board.

For Australia, in particular, the issues are difficult. A refusal to permit the take overs will embarrass Australia at a time when it has just signed a free trade agreement with Singapore, a litmus test of Mr Howard's free trade credentials.

Perhaps more importantly, a refusal will sour relations with one of the countries in South-East Asia which has been most sympathetic to Australian efforts to win acceptance as a full partner in the region.

That initiative has faced the open opposition of Malaysia's Prime Minister Mahathir, and powerful forces in Indonesia, particularly after Australia's role in securing the independence of East Timor.

On the other hand, if the takeovers are approved, it will undoubtedly arouse further resentment against the Government and national competition policy, which permits national icons to be taken over by foreign corporations in the name of economic rationalism, globalism and free trade.

At the time of writing, there were clear signs that both the Australian and New Zealand Governments were unhappy with these developments, but the final outcome of both corporate plays was uncertain.

How is it that Singapore, with one-sixth Australia's population, should be in a position to take over such large companies in Australia and New Zealand?

The very weak Australian dollar has made Australia cheap pickings for overseas corporations. This undoubtedly contributed to the effective takeover of BHP by the British conglomerate, Billiton, as well as a spate of other take overs and mergers.

The dollar has collapsed under the weight of the burgeoning $300 billion foreign debt, a fact detailed in three reports from Salamon Smith Barney/Citibank, UBS Warburg and HSBC (Australian Financial Review, October 6, 2000). The Australian dollar has fallen from 78 US cents in June 1996, shortly after the Howard Government came to power, to just 52 US cents today - a fall of 46 per cent in five years.

In contrast, Singapore runs balance of payments surpluses, despite the Asian economic meltdown in 1998, and therefore has maintained a strong local currency.

Unlike Australia, Singapore has consistently pursued a policy of vigorous government support for key financial ventures such as its aviation and communications industries.

These are held by Temasek Holdings, Singapore's state investment arm, which has controlling interests in both Singapore Airlines and SingTel.

When the Hawke and Keating Governments were privatising Qantas and Optus in Australia, the Singapore Government was conducting its own "privatisation" of both Singapore Airlines and SingTel. However, the difference was that the Singapore Government, through Temasek Holdings, kept a controlling interest in both companies.

SingTel is Singapore's largest company and one of Asia's largest in terms of market capitalisation.

Lee Hsien Yang, SingTel's President and Chief Executive Officer, is the younger son of Singapore's long-time Prime Minister, Lee Kwan Yew.

The capital for Temasek's investments comes from the huge investment pool created by Singpore's Central Provident Fund, which requires all Singaporeans to save for their retirement, health and housing needs.

The Provident Fund now bankrolls Singapore's moves into industries such as banking, computers and communications, not only in Singapore, but throughout the region.

Emulating Singapore, Australia should mobilise its huge superannuation funds for domestic investment. Australia needs to rebuild its manufacturing industries to at least the same size as other developed industrialised nations, and thereby address the balance of payments and foreign debt crises.

If we do not want to lose valuable, strategic, national icons offshore, if we not not want to become a "branch office" economy, then we should not be privatising so many of our public corporations. Singapore realises what Australia seems to have forgotten - that small countries, like Singapore and Australia, cannot build world class competitive industries that serve the national interest and keep them in domestic hands without goverment co-operation and support.

Instead of attacking Singapore, Australia should be learning from its success.

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