Saturday, January 22, 2011

Why S'pore can't produce a Fortune 500 company

Why S'pore can't produce a Fortune 500 company Straits Times: Sat, Jan 22
SINGAPORE is too small and its talent pool is too small to produce a world-class manufacturing giant of the Fortune 500 class.

It must therefore continue to rely on foreign multinationals to drive its growth, despite best efforts to nurture local enterprises.

Minister Mentor Lee Kuan Yew expressed this view when he was interviewed for the book, Hard Truths, launched yesterday.

Asked by a team of Straits Times journalists about the direction for the Singapore economy, he was blunt about the impact of the country's small size and limited talent pool on companies' ability to grow, especially in manufacturing.

'Look, unless you are big enough, the champions in any particular industry will be the ones who are the best in their field,' he said.

He cited Hong Kong, with seven million people. 'What has Hong Kong got? Property developers and market players. Is Li Ka Shing making a product that is selling worldwide? No, he's just acquiring real estate, ports, retail stores and telecoms companies.

'What is the most successful company in Hong Kong? (Trading company) Li and Fung. Two bright brothers, but they are in logistics chains for every company. They're not in manufacturing because they can't compete.'

Even Taiwan, with 20 million people, has fallen on hard times, for all its electronics manufacturing successes.

In Singapore, digital entertainment products maker Creative Technology, once Singapore's tech golden boy, has found the going tough.

'Creative was one of the few companies that were trailblazers. But look at the trials and tribulations they had to go through. They've had to recruit people from Silicon Valley to keep up with the competition because Singapore doesn't have the critical mass of talent,' he said.

And even if a company grows and is successful, it will eventually be gobbled up by bigger companies. 'Get to world class and there will be a company that's eyeing all these possible take- overs,' he said.

He cited food manufacturer Tee Yih Jia, founded by 'Popiah King' Sam Goi, which sells its frozen food products overseas including in the United States.'Once it begins to succeed in America, it will be taken over by conglomerates like PepsiCo,' he said. 'How do I know? Because I've attended PepsiCo meetings. They collect foodstuffs from around the world and sell them in their outlets in Latin America and in all the cinemas across the world.

'They will buy up Tee Yih Jia, and Tee Yih Jia can't compete with them because where are its outlets?'

Mr Lawrence Leow, president of the Association of Small and Medium Enterprises, agreed that Singapore faced insurmountable challenges to producing a global manufacturing company.

But he felt Singapore could produce global companies in other areas. For example, technology companies like Facebook need not be constrained by the country's size. Singapore could also attract foreign SMEs to team up with local ones, he added.

Mr Douglas Foo, founder and chief executive of Sakae Holdings, which has 40 sushi restaurants in Singapore and 30 more overseas, said Mr Lee's comments reflected the 'real and brutal facts of the business world'.

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