News Stop: Let’s Be Local Company-friendly Too in Singapore

Singapore’s economy has been driven largely by foreign direct investments for the past few decades. An article in today examines the attitude towards local companies, and we address some issues in this short commentary.

An article caught my eye today about the local vs multi-national companies debate. “Let’s Be Local Company-friendly Too” by Vincent Chia (Today, 2 August 2006) discusses a few interesting issues regarding the state of local companies in Singapore. If it does not make you sadder, think about 7 out of 10 Singaporeans prefer a global brand product vs a local brand.

Quoting some interesting excerpts from the article:

At a corporate level, Singapore is today home to 7,000 multinational companies (MNCs) and international companies. These include global names from the United States, Europe and Japan — whose presence is most substantial in the petroleum, finance and electronics industries.

It has been estimated that MNCs and international companies contribute about 40 per cent of the Gross Domestic Product (GDP), a critical contribution to job creation and our economy. It is no wonder that we are foreigner friendly.
This form of dependence has its critics who assert that Singapore is no more than a hotel economy for these MNCs. The dependency stretches beyond 40 per cent of GDP as a fair number of local companies rely on MNC clients for a substantial portion of their revenue.

MNCs are also known to be rather realistic about net costs and benefits. If they find a cheaper location for their operations, they have no qualms uprooting. As Singapore gets more expensive, we fear the exodus of more MNCs to cheaper locations like China and India…………

On the other hand, helping to grow local companies is not straightforward. There are two extremes, one being companies who literally demand handouts or subsidies and the other being companies who are suspicious of government assistance. The rewards may also not be as significant…….

Capital is often a constraint in business, whether you are an existing business or a startup. In this regard, EDB has its Startup Enterprise Development Scheme and its Business Angel Scheme to co-invest with Investors in local companies and startups.
However, being an investment dollar-matching scheme, what the EDB has done is to empower the investor.
The implied assumption is that since EDB has shared the risk of the investment, the investor should be able to invest in riskier ventures. Investors should also be able to lengthen their horizons to enable and give the small start-up time to grow, and not make a quick buck and exit. Do we have enough of such investors in Singapore?

Really, the effort of developing local companies is not just the job of the EDB. We can all stand up for Singapore and play our part. As a consumer, we should support local company products and services if they are up to standard. This applies to corporate customers who should give budding local companies a chance or two. And finally, our knowledge workers should consider working for local companies instead of an MNC.

There is nothing wrong with being foreigner friendly as it has brought us this far. But going forward, we should also ensure that we are just as local friendly.

There are a few factors why we may not be local company-friendly:

• Local Companies short-changing their employees: I often hear about local bosses short-changing their employees on overtime pay, working hours and even small costs. The other problem is that most local bosses don’t think “win-win”, but “win-lose”. I don’t dispute the fact that local companies cannot give that kind of pay like the MNCs but it must at least try to provide a good working environment for their employees. The hardest part is to give a growth opportunity for the employee. That’s one problem which is culturally fixed. While I respect some old business men for their success, I disagree with their attitude in expenditure. This is what a relative told me, “Since you own a company in the UK, why don’t you get them to buy you a car and pay off your entertainment fees?” My answer to him is that, “Look, there is something called corporate governance. If there is additional revenue, we should grow the company.” I call this the “Mama shop” mentality, i.e. these businessmen start to spend without the attitude to grow the business and their people as well. The most important rule in making successful business is the management of people. Most local bosses want to have great ambitions, but failed at the instant when they need to make certain sacrifices of treating their employees well.
• Can Entrepreneurs bootstrap? The successful ones that makes the headlines in the newspaper are bootstrappers, not fundraisers. It is only good to fundraise when you have a strong customer base and a product that you can sell to. A lot of entrepreneurs make this claim that they have the idea. An idea without execution is a just dream. It is not EDB’s job to help these entrepreneurs. If they are seriously entrepreneurs, they should be able to bend around the system and find their survival. I always wonder how the Chinese and Indian entrepreneurs survive in their respective countries and make their business grow. It’s because of the adversity environment. Think about it, the MNCs give us such a comfortable cushion, why should we be going into starting our own business?

I still agree with Vincent that we should be local company-friendly, but the bosses in the local company need to learn some proper management and also think “win-win”. If such conditions don’t exist, then local companies is just a temporary dumping ground for people who wait for the boom to join MNCs. It’s not difficult to start a company in Singapore. The real challenge is whether you can grow it fast and strong within a short period of time.

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