The Government-owned Business Times (which newspaper in Singapore is not?) recently announced that Mr Lee Han Shih, its senior correspondent, was “leaving” the newspaper. We reproduce below some of the pieces Mr Lee had written over the years for Business Times.
The housing perks we pay for
March 11, 2003
S’poreans are subsidising expat housing through the govt’s generous tax incentives for MNCs
EVER wondered who’s helping expatriates in Singapore pay for their $15,000-a-month houses and $8,000-a-month condominiums? Singaporeans, of course.
Well, not directly. But indirectly the millions of people in Singapore have been subsidising expatriates in housing allowance for years, it is just that not many realise they are doing it.
For proof, look at yesterday’s The Straits Times which reported that the Japan-based unit of British drug giant GlaxoSmithKline has been slapped with more than 20 billion yen (S$297.4 million) in taxes and fines for failing to report income at its Singapore subsidiary. This income, over a three-year period, came to a staggering 65 billion yen or 966 million in Singapore dollars.
Glaxo is under fire because Japan considers money made by overseas subsidiaries of Japan-based companies to be part of taxable income, subject to the same 25 per cent tax rate prevailing in the country.
Japanese reports said the Glaxo unit in Singapore had been paying ‘only a few per cent’ tax during the period in question, hence the huge back tax and fine imposed by the tax authority.
Glaxo is contesting the claim. How it settles the issue is interesting, as it is the largest additional tax levied in Japanese history and the outcome will set a precedent for numerous foreign companies which choose Tokyo as their Asian headquarters.
But what is more pertinent in the local context is the revenue that Singapore forgoes. Multinationals such as Glaxo make, as a very rough estimate, perhaps $440 million a year in profit from their Singapore operations. If it is a local company – as opposed to a high-tech multinational – it would be hit by a tax rate of 20 per cent or more. But because it brings in something Singapore needs – pharmaceutical know-how and endorsement through its investment here – it enjoys a preferential tax rate. Going by reports from Japan, that tax rate is unlikely to be more than 5 per cent.
This means instead of paying taxes of $88 million a year (20 per cent tax), Glaxo probably paid only $22 million (5 per cent) or less – a $66 million revenue loss for the government, and hence the people of Singapore. Over three years, the number grows to about $200 million.
No wonder Glaxo and other MNCs in similar circumstances can afford to give generous housing allowances to their expatriate staff in Singapore. What is, say, a $200,000 a year rental for a senior employee when the company is saving tens of millions of dollars in taxes?
It must be said that Glaxo is perfectly justified in what it is doing – after all, it is only taking up an offer of a government tax incentive in exchange for its investment.
But is it a good bargain for Singapore? The potential tax loss is large. Glaxo alone could account for nearly $200 million in three years. Think of what this $200 million could do if it goes into the government’s coffers – cheaper Housing Board flats, no more public transport fare hike ($20 million a year) and perhaps lower medical costs for the population.
Of course, if Glaxo were not given a tax incentive, it might not even come here and there would be no tax revenue. So the preferential tax treatment is perhaps justified because it brings in investments that could otherwise have gone to, say, Ireland. But the fact remains that many MNCs enjoy tax rates much lower than that for locals, and this differential is an indirect form of subsidy from Singaporeans to expatriates. Yes, a small portion of this subsidy flows back into the local economy, most notably in housing income, but a much larger portion is lost to Singapore.
From this perspective, if a property owner talks about earning a good rent from an expatriate, what actually happens is that he is the lucky person who gets back some of the subsidies from his fellow Singaporeans.
So much land for golf courses?
September 6, 2000
Public actually has wider choices in Concept Plan review
TWO Saturdays ago, Singaporeans were presented with a stark choice. They were told the country would soon run out of space and they must choose – through proxy – either to allocate more land for parks or for factories and warehouses. Actually their choices are much wider than that.
The park or factory scenario was presented by the Urban Redevelopment Authority, a statutory board conducting its once-a-decade review of the Concept Plan, the blueprint for Singapore’s physical development.
Based on a target population of 5.5 million (up from four million today), URA said Singapore needs 16,000 hectares of land for development. This comprises 8000 ha for housing, 6000 ha for industries and 2000 ha for parks. As the available land is only 12,000 ha, there would be a shortfall of 4000 ha, which necessitates hard choices.
On the surface, the choice is thrown open to the public, which will respond through two committees whose members are carefully selected by the URA. In practice, the URA may already be disposed to giving more land for industries.
In background material to the press, the URA said “currently we have about 0.67 ha of park land per 1000 persons. If we want to have more space…we would then need to put aside additional 2000 ha of land. As a comparison, in Hongkong, 1000 persons share 0.15 ha of parks”.
This seemingly neutral set of figures carries a powerful message. Singapore and Hong Kong are rival economies. If people here are already enjoying more than four times the park allocation in Hong Kong, it would be a small sacrifice to let go of some parkland for factories, if the return is greater prosperity for all.
There are two points in such an argument that have to be scrutinised. The first, as pointed out by an e-mail sent by reader Ngiam Shih Tung is that the comparison is not correct.
Drawing on his experience in Hong Kong – “I have seen a lot more countryside than in Singapore” – Mr Ngiam checked out the official websites of both the Hong Kong and Singapore governments. To his surprise, he found that 84 per cent of land in Hong Kong was not built-up, compared to 50 per cent in Singapore.””Possibly, URA is only counting urban parks, but in terms of land use, nature areas have recreational uses as well and should be included,” Mr Ngiam said.
Using official figures, Mr Ngiam estimated that Hong Kong has 63,000 ha of “parkland” and water catchment areas (all of which could be used by the public). This works out to 6.4 ha per 1000 people. In Singapore, after including places such as Pulau Ubin, there are 5459 ha of parkland, or 1.4 ha per 1000 people.
This means Hong Kongers, instead of having only a quarter of the per capita parkland that Singaporeans have, are actually enjoying four to five times as much as the people here. From the perspective of quality of life, it would seem that Singapore, if it wants to keep up with Hong Kong, should do with less industries and more parks.
Comparisons apart, URA also did not mention golf courses when it presented Singaporeans with a choice of parks or industries. Under the 1991 Concept Plan, URA had catered for a staggering 29 golf courses in Singapore, up from the 14 already in existence. Land, which could have been used for parks, has been reserved for golf courses. How much land is put aside is not known.
Currently, the 14 golf courses are sitting on 1400 ha of land. Another 15 courses would presumably occupy 1500-2000 ha. This means the land reserved for golf courses is almost as big as that reserved for parks.
This raises some questions. As Singapore is already dotted with golf courses, is it necessary to build more? (Ask any veteran golfer and he would say that Singapore and southern Malaysia already have the highest concentration of golf courses in the world).
In other words, we would be putting aside as much land for golf, enjoyed by a minority, as for parks for the entire population. The proper choice, therefore, is not just between parks and industries. Land reserved for golf courses would have to be considered as well. And, of course, there is one last question – would the committees set up by URA now look at golf courses, even though they have not been briefed by the URA to do so?
Silence on maid abuse must end Those who could speak up against maid Muawanatul Chasanah’s horrific abuse kept quiet. The govt should raise its voice now.
Maid abuse
July 27, 2002
LAST week, Singapore was confronted with the horrible spectacle of the worst maid abuse case in its history.
Muawanatul Chasanah was for nine months regularly starved, whipped, punched, slapped, kicked, jabbed with sharp objects and scalded with hot water by her employer, Ng Hua Chye. She eventually died after a severe beating on Dec 2 last year.
At her death, the 19-year-old girl – who was 50 kg when she arrived in Singapore – weighed only 36 kg and had more than 200 injuries on her body.
Ng was originally accused of murder but the charge was changed to manslaughter. Last week, he was sentenced to 18 years and six months in jail and six strokes of the cane. Has the matter ended there? Most people assume so. They can’t be more wrong.
Ng has been found guilty, but he couldn’t have carried out his deeds without the tacit approval, or at least inaction, of other parties.
Let’s consider some facts:
Ng’s wife and sister were present at many of the beatings and did nothing to stop him.
Foreign maids are required to go for six-monthly checks for pregnancy, VDRL and HIV. During her nine months of torture, Ms Chasanah had two check-ups. Though her physical condition and injuries clearly showed she was in deep distress, no alarm was raised by the doctors and nurses.
Going by a guidebook for employers produced by the Ministry of Manpower (MOM), it has assumed that heavy punishment, along with an appeal that such action will ‘undermine Singapore’s effort to be a gracious society’, is sufficient to check abuses.
In fact, MOM doesn’t seem to believe maids could actually die from abuse in Singapore. Its guidebook laid out 11 types of abuses ranging from rape to causing bodily harm to criminal intimidation to wrongful confinement. Death was not mentioned.
Ms Chasanah may not be the first to die of abuse. There have been instances of maids jumping to their death, some of which could be linked to severe physical and psychological ill-treatment by employers.
Maids seem uninformed of their basic rights as residents of Singapore, such as protection by the police. Many maids come from a background which carries with it a natural fear that the police are working for the rich, and are reluctant to seek their protection even when the opportunity presents itself.
Concerned neighbours have become the only check against abuses for some maids. It was Ms Chasanah’s bad luck that Ng’s neighbours either didn’t know or didn’t care. A Mr Neo told the Straits Times that even if he knew, he wouldn’t report to the police. ‘It’s not my business. He (Ng) can do what he wants, that’s his problem. And anyway, God can see,’ he was quoted as saying.
There’s a good chance Ms Chasanah’s family won’t get a cent from insurance. Employers are required to buy a minimum $10,000 insurance for maids, benefiting herself or her next of kin. But this is meant only for accidents in the course of work that led to death or disability. Insurance agents told BT this probably won’t apply in the case of Ms Chasanah.
So, is the matter of Ms Chasanah closed?
The answer should be obvious. Two courses of action must be pursued. The first is to see whether there are other parties to be punished for helping and abetting the wrongdoing.
This would deter others who can, but do not, help the victim. The second is to remedy the system to prevent similar abuses in the future.
And if Singapore is indeed serious about being a gracious society, there’s also a third course: do something for Ms Chasanah’s family. Punishment is the job of the state and all eyes will be on the public prosecutor to see whether other parties involved in Ms Chasanah’s abuse and death will be charged. But this could take some time.
Meanwhile, some steps could be taken immediately to protect maids. For instance, the government can make it mandatory for doctors and nurses who conduct regular check-ups to ask specifically whether they have been hit or beaten and to identify maids in distress and report the cases to the police. Agents could also be required to make regular checks on maids placed by them. Any agent whose placements show a high number of abuses should have his licence revoked.
Such measures are, of course, not foolproof. Abuses will continue, no matter what the government does. Some maids, who owe their agents vast sums (at least to them), might be too scared to complain. But at least the government would be doing something on prevention.
Given the nature of Singaporeans, this very fact should go a long way to reduce maid abuse. Singapore, it has been said, is little more than groups of people tied together by economic interest. The government is trying hard to change this impression. Ms Chasanah’s case presents a perfect chance.
To show how a gracious society should behave, the government can set up a fund – perhaps draw upon the half-a-billion dollars of maid levies it collects every year – to compensate abused maids and their families. It need not be a large sum, as abuse cases are not common. But at least victims, such as the family of Ms Chasanah, now deprived of a daughter and a breadwinner, will be able to get something out of the tragedy.
After all, Singapore has failed Ms Chasanah. Isn’t it only right, now, for the country to give something back to her loved ones, over and above punishing her tormentor?
STB and URA need to move much faster
3 Sep 2002
A review of hotel safeguarding policy every 5 years is not good enough
IN a joint statement last Friday, the Singapore Tourism Board and the Urban Redevelopment Authority announced changes to their Hotel Safeguarding Policy. A total of 19 hotels in secondary locations were freed for conversion to other uses, while another 29 in prime locations are to stay put as hotels.
Those who think the relaxation has not gone far enough will have to wait another five years. ‘We will review the hotel safeguarding policy in five years’ time in tandem with the review of the Master Plan,’ says the URA and STB statement.
But the industry may not be able to sit out this long period of review, as things are showing every sign of getting from bad to worse.
In 1997, when the hotel safeguarding policy was introduced, the hotel occupancy rate was near 80 per cent. It fell to 76.3 per cent last year, while the number of rooms stayed almost unchanged at around 27,500. On an average day in 2001, more than 6,500 hotel rooms were vacant in Singapore.
This is not because there are fewer tourists, but because more visitors prefer to stay with friends and relatives or are just simply taking day trips here.
In 1997, 63 per cent of all tourists stayed in hotels. Last year only 59 per cent did so. Revenue from hotel rooms also fell from $1.25 billion in 1997 to $1.15 billion last year.
Despite lower income, hotels have to spend huge sums on renovation to stay in the game, such as the $95 million spent by Shangri-La. In these trying conditions, is it surprising that many hotels lose money?
In 1997, STB and URA could have helped hotels by allowing some to convert to condominiums, thus stabilising rates. Instead, a policy was introduced that prevented them from converting. (The last hotel allowed conversion was Cockpit, bought by Wing Tai.)
As a result of the hotel safeguarding policy, rates fell, hotels made losses and newcomers were discouraged from investing in the industry. And yet nothing was done, not even in 1998, when occupancy rate plunged to a low of 71.3 per cent.
From 1997 to now, there have been many changes at STB. It has a new chairman (stockbroker Wee Ee Chao who replaced Wing Tai’s Edmund Cheng) and a new chief executive (from Tan Chin Nam to Yeo Kee Leng) and also changed its name (from the Singapore Tourist Promotion Board). URA, too, swapped its longtime chairman Associate Professor Khoo Cheng Lim for accountant Bobby Chin, and CEO Tan Kim Siew for Tan Yong Soon.
But it has taken five full years for the two boards to relax the hotel safeguarding policy.
The changes announced last Friday helped, but are not enough. And it must be disheartening for hotel owners and hoteliers to hear that the next review won’t come for another five years.
What Singapore needs now is not a restrictive policy, but one that allows hotels to convert, and thus open the door for others to build new hotels. And it needs a much faster pace of change. A review every five years isn’t good enough.
HDB carpark operations are profitable
May 28, 2002
CONTRARY to popular belief, the Housing and Development Board does not lose money on its carparks. In fact, it is making good profits out of them.
HDB, which houses 85 per cent of Singaporeans, is also the nation’s biggest carpark operator. As a rough guide, it builds three parking lots for every four flats in its estates. It now manages more than 640,000 car, motorcycle and lorry lots.
Operationally, these are highly profitable. In financial year 2000-01, HDB made $87.1 million from its carparks – half of that ‘contributed’ by motorists’ parking fines. The year after, profit eased to $80 million.
Yet, despite these figures, HDB carparks are officially losing money.
Early this month, National Development Minister Mah Bow Tan told Parliament the carparks lost $99 million in financial year 2000-01 and $105 million in FY2001-02.
To reduce these losses, HDB has no option but to raise parking charges by 11 to 20 per cent come September, the minister told fellow MPs.
Mr Mah bears the brunt of a rising storm of protest over the rate hike. But some have rallied around him. Among them was Wee Kiat Sia, head of HDB’s carpark section. In a letter to the Straits Times, Mr Wee said: ‘The HDB residential carparks are heavily subsidised as current charges are way below the cost of providing these carparks.’
So are HDB carparks a money spinner or money loser? It depends on how you tally up the cost.
Costs for projects such as carparks, MRT lines and power stations come on two levels: developmental (money spent to build them and to service loans) and operational (money spent running them).
Operationally, HDB carparks are profitable. But when interest payments are included, they plunge into the red.
HDB borrowed perhaps $4 billion from the government to buy state land and to build carparks. Servicing these loans is the single biggest expenditure item for HDB carparks – and the reason they are in the red.
When the carparks suffered a $83.6 million deficit in FY 1999-2000, interest paid to the government was $175.1 million. In FY 2000-01, the deficit was $99 million and the interest payment $186.1 million.
Taking away cost of interest, the carparks are immediately profitable: $91.5 million in 1999-2000 and $87.1 million in 2000-01.
When Mr Mah and Mr Wee talk about deficits and the need to raise rates, they include both developmental and operational costs in their computations.
This is not always the case with government projects. Take the MRT, for instance. The cost is split into two: MRT Corporation (now part of the Land Transport Authority) carries all developmental expenses, including interest payments; while SMRT runs the rail system.
This allows SMRT to show a profit and go for a listing. If SMRT were to bear both developmental and operational costs, it would run at a loss, there would be no IPO – and fares would have to be raised sharply to cover its deficit.
Can the same approach be applied to HDB carparks? If the government shoulders the building cost, the carparks will be profitable and there will be no need to hoist parking fees.
But it is not fair for the government to subsidise motorists at the expense of those who take public transport, Mr Mah told Parliament.
This leaves HDB with the full responsibility of running the carparks and making ends meet. Even if one accepts this, there are other solutions apart from raising parking charges.
Why, for example, is it still paying the government 4.5 per cent interest when it can refinance its loans at better rates? At 3.75 per cent, its interest cost would be cut by $31 million a year – the exact same amount it would get from the parking rate increase. Thus, a simple refinancing of its loans would do away with the need for the unpopular rate hike.
But a bigger issue is land cost. HDB may have overpaid for the land it bought for the carparks. Hence the deficit every year.
When a private landlord overpays, he lives with the losses, as it would be suicidal to try to pass the cost to customers. (If, say, Ngee Ann City upped its parking fees to $10 an hour, motorists would take their cars and their business to Paragon and Mandarin Hotel.)
As a monopoly, HDB has the luxury of being able to raise rates and make them stick. Car owners in housing estates may complain, but they have no other place to park. So they have been made to pay for HDB’s mistake.
From this perspective, Mr Mah is not wrong to say there is subsidy for HDB carparks. It is just that the subsidising has been passed from the government to hapless motorists.
Beware the revival of Kra Canal plans
Date unknown
It’d affect many parts of S’pore’s economy
WHAT might President George W Bush be planning that could have a big impact on Singapore’s economy and its housing prices?
No, it is not a war in Iraq, but something more long term: the Kra Canal, a US$20 billion project to dig a 50 km east-west waterway across southern Thailand linking the Andaman Sea on the Indian Ocean side to the South China Sea on the Pacific side.
The canal was mooted in the 17th century when Thai and European leaders got together to talk about hacking through the Isthmus of Kra to create a waterway for vessels to bypass the narrow and pirate-infested Straits of Malacca.
Though nothing came of it, the idea of a canal has surfaced now and then in the ensuing 400 years, but has always failed to take off due to lack of funds.
Now things are different. The Bush administration, worried about the rise of Islamic fundamentalism in South-east Asia, is said to be looking into backing the project.
Bypassing the Lion City
This has important implications for Singapore, a country that has leveraged its superb location at the mouth of the Straits of Malacca into a major nexus of trade and shipping between Asia and Europe.
More than manufacturing, more than all the high-tech industries, it is trade that brings prosperity to Singapore and keeps its property prices high. Trade is also one of two major sectors in Singapore – the other being tourism – to benefit from the growth of China.
Now, all this could be taken away by the Kra Canal. For centuries, vessels sailing between the Indian Ocean and the Pacific can choose only one of two routes: a shorter one through the narrow Straits of Malacca, or a longer but less crowded route going south of the Equator and skirting the Indonesian archipelago.
The Kra Canal will create a third route, one that offers a 1,000 km shortcut between the two major bodies of water. This alone will ensure many ships will forsake the Straits (and Singapore) and opt for Kra Canal.
But the focus of the Bush administration is not on container ships but oil tankers. Perhaps half of Asia’s oil imports now goes through the Straits of Malacca, which is wedged between two countries with a predominantly Muslim population: Indonesia and Malaysia.
As China grows, more oil will go through the Straits, and – at least in the eyes of America – Asia will become more vulnerable to terrorist attacks from Islamic fundamentalists.
The Kra Canal is thus a way for President Bush to shift Asia’s energy traffic away from South-east Asia to what it perceives to be a more friendly and Buddhist Thailand up north. That is the reason why there is much talk in Bangkok and Hong Kong on American’s growing involvement in jump-starting the project.
Should the Kra Canal take off, Singapore could lose a big chunk of its
shipping traffic.
Numerous expatriates could relocate to Thailand. Many industries may follow. Banks may need to slim down even further.
PSA, now going through a painful retrenchment, may be hit by a further loss in business. Should that happen, demand for housing could dive and it is anyone’s guess how that would affect prices.
Remaking Singapore
August 12, 2002
Buying a new home? Think again
ANYONE thinking of buying a home is well-advised to read between the lines of the recent Economic Review Committee’s report on changes to the Central Provident Fund system.
Unveiled on July 15, ‘Refocusing the CPF System for enhanced security in retirement and economic flexibility’ is replete with recommendations that were promptly accepted by the government.
Most homebuyers are now familiar with these proposals, such as a 150 per cent cap on the use of CPF for a single home, and lower contribution rate for older workers. But many failed to realise the most important part of the report lies not in the proposals – which are relatively mild – but in the hints on things to come.
The report was produced by a subcommittee chaired by Tharman Shanmugaratnam, Senior Minister of State for Education and Trade and Industry.
He faced two conflicting tasks. On one hand he had to find ways to extricate CPF from the home market, and on the other, he had to make sure whatever he proposed would not destabilise the already jittery market.
CPF has been extensively used for home financing. Some 40 per cent of its members’ fund is tied up in houses, condominiums, and apartments, while another 30 per cent has been channelled through government bonds to finance the purchase of HDB (public) flats.
This level of commitment is hardly prudent for a retirement fund, as CPF has become dangerously susceptible to changes in property price.
In tackling the issue, Mr Shanmugaratnam seems to have taken a two-pronged approach. Some measures are adopted with near immediate effect to prevent a deeper commitment of CPF to property. Others are held in reserve and will only be introduced when the home market has returned to health and is able to absorb the changes.
A glimpse of this can be seen in the executive summary of Mr Shanmugaratnam’s report. ‘Moving ahead, CPF should continue to cater to the three key needs of retirement expenditure, healthcare, and home ownership. CPF should endeavour to meet these needs at a basic level,’ it said.
What, exactly, is home ownership at a basic level? And how would CPF change to meet this?
The answer is easy. A basic level of home ownership can only mean CPF will be used for buying only one residential property.
At the moment CPF members, as long as they have money in their ordinary accounts, can use the fund to finance their second, third or even fourth home.
At his July 15 press conference, Mr Shanmugaratnam was noticeably silent on this issue. When asked whether there was any proposal against the use of CPF for multiple homes, his answer was an emphatic no.
But this does not mean there will be no such restrictions in the future.
Limitations ahead
Think about it. Soon the use of CPF for one property – it could be the first and only property for a CPF member – would be limited to 150 per cent of its value. The cap would be brought down to 120 per cent in five years, and, perhaps, lower in time to come.
But there is no restriction on the use of CPF for the second or third homes, provided they are also subject to the same cap.
This does not make sense. The guiding principle of Mr Shanmugaratnam’s proposals is to reduce the risk of CPF investments to ensure there is enough money for retirement.
It is obvious the first property bought by CPF buyers for living in is safer (that is, a lower risk of the owner being unable to meet his mortgage obligation) than property that is bought for the purpose of earning rental income.
If the government sees it fit to limit these first properties to a CPF cap, then logic dictates it should be even more diligent in limiting risk on second and subsequent homes.
From this perspective, there should be little doubt that restriction on the use of CPF on multiple homes will be introduced. The question is when, and in what manner.
For would-be homebuyers, the issue is: should they be making a purchase now, when it is clear that further tightening of the use of CPF is on the way that will surely affect prices? So, why not just rent a home for a few years until all the bad news is out of the way?
HDB resale market might soon not be the same
12 Feb 2002
THIS could be the year the Housing and Development Board kicks the bottom out of the resale market for property agents.
For nearly 40 years since it was set up in 1960, HDB has been living in a co-existence mode with property agents in the resale market for HDB flats: HDB builds the flats and gets the buyers for its new flats, while resale agents find buyers for flats that come into the secondary market after the first owners’ mandatory 5-year stay.
At its peak, an estimated 20,000 to 30,000 full-time and part-time resale agents lived off the HDB secondary market, which generated hundreds of millions of dollars of commissions each year.
But things are changing. Just as the laws of a jungle could shift drastically with sharp changes in ecology, creatures that have long co-existed could turn competitive.
Last year, HDB took the first step into the agents’ turf by setting up an online website called e-Resale to help buyers purchase resale flats. The site offers faster service and lower administrative fees and, most important of all, allows buyers and sellers to dispense with commissions to agents.
At up to 2 per cent a shot, a $400,000 flat can save the buyer and seller $8,000 if it goes through e-Resale instead of an agent – a sum that could be spilt between the two parties in whatever way they like.
No wonder the site grabbed 5 per cent of the market only a month after it was launched. And anecdotal evidence suggests its use is increasing among the younger HDB residents who are more Net savvy.
If agents feel threatened, they are putting up a brave face. In an interview last year, Jack Chua, president of ERA, one of the biggest HDB resale agents, said: ‘Agents still perform the most important role in the entire resale process – that of matching sellers and buyers and of getting the best possible price for our clients. The online system will never replace the human touch.’
Mr Chua is right – but only for now. The e-Resale site is not good enough to replace a company like ERA with its extensive network to match buyers and sellers.
But what’s evident to Mr Chua and other agents is that HDB could have gone a few steps further with e-Resale – by performing a matching service online. With its own huge database, it could even spot potential buyers before they think of selling their flats or buying a resale one, and send them a letter to offer them the service of e-Resale. Terminals could also be put in community centres to allow those with no personal computers at home to go online.
Why did HDB not put all these enhancements into the site? The answer is simple. First, it wanted to go slowly so as not to offend the agents who still number in the thousands. Then, HDB was in no hurry last year. Its job, after all, is to build flats, not to get into the resale business.
But now, HDB has cut back its building programme drastically due to lack of demand. And there’s talk that the Economic Review Committee could decide to privatise parts of public housing. Should that happen, HDB must look for ways to put its huge staff to work in other areas.
Already, HDB is fighting back. It recently launched its ‘premium flat’ series, which would compete with the lower end of condominiums.
If pressure mounts, the logical move would be for it to upgrade e-Resale to be a one-stop site that will take care of everything, from matching resale buyers and sellers to documentation and financing.
This will serve two purposes – the site will become a good source of revenue (even if it undercuts agents, it should rake in tens of millions a year).
Moreover, if parts of HDB’s functions are privatised, it can build on the expertise of e-Resale and sell the service in the region.
This is, after all, what almost all government-linked companies do. So why should HDB take a different route?
A little more drama than needed
March 25, 2003
CPG was sold to Downer, but its fate may lie with Charles Chan
SO it comes to pass that Temasek Holdings, after months of planning and advice from JP Morgan, is putting the fate of a government-linked company (GLC) and its 2,000 employees indirectly in the hands of Hong Kong’s most famous asset trader.
The company is CPG Corp, which Temasek has agreed to sell to Australian engineering consultancy Downer EDI for $131 million. The asset trader is Charles Chan Kwok-keung, known to numerous Hong Kong investors as the mastermind behind the purchase and sale of at least half a dozen listed companies, and to investors in Singapore as the recent buyer of listed retail concern Provisions Suppliers Corporation.
Mr Chan may be well-known, but his name was conspicuously absent from the press releases issued by both the government’s holding company Temasek and Downer, the No 2 engineering consultant in Australia.
This is interesting, since both Temasek and Downer stressed the ‘strategic fit’ between Downer and CPG – the former Public Works Department – in combining their strength to bid for regional building and design jobs.
Anyone who knows Downer knows that a big chunk of its regional jobs comes from Hong Kong and can be traced to its relationship with Mr Chan and his Hong Kong construction arm Paul Y-ITC.
Paul Y owns 37 per cent of listed Downer through a Malaysian company called Pembinaan DGL Holdings Sdn Bhd, which translates to DGL Construction. The ‘DGL’ of course, stands for Downer Group Ltd. Downer and Paul Y have been jointly securing jobs from Hong Kong’s rail operator MTR Corp and from the Cheung Kong group controlled by billionaire Li Ka-shing. Jobs from the latter include those at the flagship Cheung Kong Centre.
Mr Chan is known to be close to Mr Li, and in fact the two have many joint investments. One is said to involve Downer. Years ago, Downer was owned by Brierley (formerly from New Zealand but now listed in Singapore). In 1994, Brierley sold Downer to Paul Y, which then counted Cheung Kong as a shareholder.
How much influence Mr Li has on Downer is hard to tell – ‘No, no, no, no, no, no, no!’ was the reply of a Downer official yesterday. But Mr Chan, rainmaker and the biggest investor, has a lot of say.
(Downer’s shareholding is scattered. The only large shareholder apart from Paul Y is Marketform Ltd, a Lloyds-related underwriting group with just over 10 per cent. This means Paul Y’s control in Downer can hardly be challenged by other investors.)
Last October, Mr Chan announced plans to buy some assets from Paul Y, the biggest of which was its stake in Downer, at an unspecified price, although David Webb, an activist for shareholder rights, put it at a staggering 86 per cent below book value.
In a most unusual move among Hong Kong’s directors who routinely endorse assets ‘relocation’ proposals by the controlling shareholder, Paul Y directors made an open statement that the deal may not be fair and reasonable.
After the move was aborted, Mr Chan then tried using his listed ITC Corp, parent of Paul Y-ITC, to take Paul Y private. When the offer closed in late December, ITC only managed to raise its 43 per cent stake in Paul Y to about 65 per cent.
As Mr Chan is clearly eager to gain direct control of Downer, another shuffling of his assets is probably on the cards. This could involve Provisions Suppliers Corporation. CPG, which will move from the Temasek fold to the arms of Downer come April 1, may also join the dance.
For the 2,000 CPG staff, used to working in steady government jobs, this could be an excitement they could do without.