Comment: Why do S’pore companies struggle to make it as global icons?

Cracking the code of the virtuous flywheel.

Abel Ang | December 19, 2021, 10:15 AM

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COMMENTARY: "Aside from Grab and a few other tech names, where are the other iconic global companies from Singapore?"

Writing for Lessons on Leadership, a new series hoping to inspire the next generation of Singaporeans through the stories of Singapore’s many successful business leaders and entrepreneurs, our contributor Abel Ang reflects on why many of our local companies continue to be too small to compete globally despite years of support.

Abel Ang is the chief executive of a medical technology company and an adjunct associate professor at Nanyang Business School.

Alex Brummer’s bestselling book The Great British Reboot was described by the Guardian newspaper as a “love letter to British enterprise.”

Brummer is a recognized economics commentator in the United Kingdom where he also serves as the City Editor of the Daily Mail newspaper. At its core, Brummer makes three key recommendations on how to reboot the UK’s economy:

1) Defend local companies

2) Invest in indigenous technologies

3) Leverage locally developed financial markets to create a flywheel for 1) and 2).

Which got me thinking — instead of the Great Singapore Sale, is it time for a Great Singapore Reboot for local enterprises?

Defend local companies

The author passionately mourns the loss of household UK brand names like ICI and Cadbury over the years.

He cites the sale of ARM, a semiconductor design and software company to Softbank in 2016 as a tragedy, after it had spent two decades as a public company on the UK exchange.

ARM is a company that has developed core semiconductor technologies since its founding in Cambridge in 1990. Its name is synonymous with the computing chips which drive almost every handphone in the world today and is strongly identified with its UK roots.

The Singapore version of such a loss is best exemplified when Fraser & Neave (F&N) was sold to a Thai investor. F&N started life in Singapore in 1883 and had been a public company since 1898. With the sale, Singapore lost household brands such as Tiger Beer, Times Publishing, and Magnolia ice cream.

Professor Tommy Koh, the rector of Tembusu College, wrote in 2014 that we have sold iconic landmarks, brands, and businesses to foreigners "without compunction."

We have been developing and nurturing local enterprises for as long as I can remember. I think we can all agree that there is value in building local brands for the global stage. Imagine if we did not have Singapore Airlines as the flag carrier for our country. Its absence would be a loss to Singapore and the world of travel.

But aside from Grab and a few other tech names, where are the other iconic global companies from Singapore?

Could the issue stem from the fact that many of our local companies continue to be too small to compete on the global stage, despite long years of support?

I recently proposed to Mr Gan Kim Yong, Minister for Trade and Industry, that Singapore can start to seed a new generation of household deep technology (deep tech) brand names by consolidating and aggregating companies that are already in their portfolio. Through Enterprise Singapore (ESG)’s SEEDs investment program, the agency is already invested in more than 100 deep tech startups.

By concentrating on a few sectors, consolidating leadership, technologies, and capital, these startups could have a better chance of making a splash outside Singapore and building themselves into the household brands of tomorrow.

Private equity funds do this regularly by consolidating multiple small companies in the same market to give them greater scale, pricing power and access to markets.

Investing in indigenous technologies

Britain is described in the book as home to some of the top universities in the world such as Oxford, Cambridge, and University College London (UCL).

Unfortunately, the fruit of their world-class research is often enjoyed by overseas investors, Brummer laments. He writes: “Too often, great ideas, skills, software, hardware and patents developed in the UK end up enriching other societies and overseas enterprises.”

A pertinent example of such a loss is Deep Mind, which had spun out of UCL’s computational neuroscience department in 2010. The company shot to fame after developing the artificial intelligence algorithms in Alpha Go, which went on to defeat the world’s top player of Go, shocking the world and setting off an avalanche of media and public interest. Unfortunately, the company was sold to Google in 2014, just two years before their algorithm’s iconic win.

What can Singapore do to avoid a similar outcome?

Singapore universities are globally recognized as being some of the best in the world, and home-grown technology companies are achieving unicorn status.

Locally listed unicorn, Nanofilm Technologies, was created with technology developed by a Nanyang Technological University (NTU) professor who wanted to see his coating technology have a global impact.

Patsnap, a technology spin-out from the National University of Singapore (NUS), makes software that analyzes patent information. It achieved its unicorn status this year when Softbank and Tencent led a US$300 million investment into the company.

The focus that Singapore has put into nurturing its local technology startups is starting to pay off, and these two companies are just the tip of the iceberg.

With the extensive investments that Singapore has put into national research in the last 25 years, I would suggest that we need to be relentless in our impatience to see more Singapore technologies and companies take their place on the global stage.

Our posture should move from benevolent patience to hungry impatience. The focus should increasingly shift from input factors — patents filed and amount of research spending — to commercial output measures: sales generated, license fees collected, and ultimately, jobs created in Singapore from companies borne from indigenous technologies.

In addition, to defend local technologies and companies from foreign takeovers, Brummer advocates having a national interest judgement decision made by the government before the sale of strategic technologies or companies to overseas investors.

I think that such an idea is worth considering for Singapore. The thresholds for such a decision could be determined by the size and scale of the companies or the strategic importance of the technology for us in the long run.

Leveraging local financial market

In his book, Brummer waxes lyrical about the UK’s position as a leading financial capital in the world, contributing some US$107 billion of value to the British economy.

He describes the love-hate relationship between the UK’s finance industry and the country because, despite its substantial size, there is minimal impact on local enterprise.

Similarly, Singapore’s finance and insurance sector accounts for 16 per cent of the country’s overall economy and employs 170,000 people. There was the criticism made of local markets being dull because very few good companies with strong technologies were keen to get listed in Singapore.

I believe that when the interest of financial markets can be aligned with the needs of local enterprises, such integration can form the basis of a virtuous flywheel to support local technologies and companies.

We seem to be taking the first steps to create such a virtuous flywheel. The Singapore Exchange (SGX), EDB Investments (EDBI) and Temasek Holdings are cooperating to bring local companies and technologies to the local bourse.

Temasek has created a dedicated anchor fund via its 65 Equity Partner vehicle to inject S$1.5 billion to back promising high-growth companies to launch their eventual initial public offering (IPO) in Singapore.

EDBI is creating a new Growth IPO Fund to invest in enterprises that are a few funding rounds away from a public listing. Through this fund, EDBI will partner with companies to grow their operations in Singapore and work towards an eventual public listing in Singapore.

These initiatives form the nascent building blocks of a virtuous flywheel that could usher in an age of entrepreneurial expansion and impact in Singapore.

Soft Reboot versus a Hard One

For any country able to crack the code of the virtuous flywheel, what Brummer promises is an “unprecedented opportunity for economic prosperity.”

Unlike the UK, I don’t think Singapore needs a hard reboot.

While there are a few areas that we could be more impatient to see a greater commercial impact, I do believe that we are heading in the right overall direction.

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