IN allowing Lee Hsien Yang’s $14 billion takeover of Optus Communications, Peter Costello has done what governments in Malaysia, China and Hong Kong wouldn’t.
He has sanctioned the expansion beyond Singapore’s shores of the island’s state-controlled business system in an age when governments are urged to get out of commerce.
SingTel’s efforts to buy big in Malaysia and Hong Kong last year were blocked because Kuala Lumpur and Beijing authorities didn’t want the Singapore Government owning its strategic assets.
So what does Costello know that Mahathir Mohamad and Jiang Zemin didn’t? The answer seems no more than a desire to cosy up closer to Canberra’s best friend in Asia.
Costello has achieved a rare political feat — allowing nationalisation by a foreign government. And this as his own government pursues a policy of privatisation.
Singapore understands this type of pragmatism. It has made a philosophy of being on all sides of an issue and seeing no contradiction with it. The business cards of the island’s movers and shakers overflow with directorships, private, public and often military.
Indeed, the economics of this city-state of four million people has been described as Leninism with a better business plan and, while meant as a wry joke in fiercely anti-communist Singapore, there’s something in it. Reading events requires some of the skills of a Kremlinologist assessing the Soviet-era Pravda for signs of what’s happening at the top.
The Singapore Government’s involvement in business has been measured as high as 60 per cent. Its top-down paternalism has delivered one of the world’s highest standards of living and Asia’s most equitable distribution of wealth.
But, like the Kremlin, there’s a factional battle inside Singapore Inc, exacerbated by its slippage into a crippling recession. The dirigist faction wants to keep the economic pump primed by the Government. That’s what has delivered Singapore its prosperity. They argue there’s enough money in the national bank account to see Singapore through tough times.
The reformist side says go offshore and compete in globalised markets, in places such as Australia.
SingTel snaring Optus offers a bit to each side. The Government’s premier company, 78 per cent owned (rising to around 85 per cent if one counts the government-managed state pension fund), has been allowed by Costello to expand offshore, a typically pragmatic accommodation. SingTel can keep its government control. Lee Kuan Yew’s son still runs the company.
It also helps that there’s a bit of Pravda in the government-controlled local press. Reading The Straits Times about Optus, it’s easy to conclude Chris Anderson runs the world’s best telco outside Singapore.
Anderson, who has been warmly profiled in the ST, might say that’s right but even he admits times are tough in the Australian telecoms sector. Optus has made accommodation for huge losses in One.Tel and is facing another crisis with the imminent demise in the US of Excite@Home and the impact on its Australian joint venture.
But the Optus deal is portrayed as nothing but good news for the 25 per cent of Singaporeans who own SingTel stock.
The challenge now for SingTel is to integrate the two companies. This is new ground for Singapore Inc. When it can, Singapore Inc makes portfolio investments abroad. But it rarely makes managed investments and, rarer still, integrated ones like it plans with Optus.
Being a monopoly like SingTel — when the Singapore Government that owns you has loaded all the bases for you — has meant you can make money simply by turning up for work. Optus profit margins in Australia are a third of what SingTel’s are at home.
But the Australian telco scene is rather more competitive. Workers get cranky and strike. Authorities demand transparency. Cranky customers complain.
SingTel is under pressure, as the ST said yesterday, to prove its $14 billion decision is the right one.