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budget airlines why some are flying high, some flailing china 2012:

crash or crash through?

hk banks’ china lending has analysts worried

asian energy special report

telcos analysis NEW ANTI-MONEY LAUNDERING LAW COULD ENSNARE YOU

Richard branson Why Virgin needed a

$1million training simulator

Who said mEn

can’t accessorise?

MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

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Contents

30

aSian energy Special report ASIA tAKINg the leAD IN CleAN eNergy

SPECIAL REPORT 30 Asia taking the lead in clean

energy Asia is investing billions into clean energy, but with appetite for carbon emissions falling, funding new power projects is going to get harder.

ANALYSIS 34 Data adoption to spearhead

telcos growth in Asia Analysts say smartphones will spur the next wave of growth in the Asian telcos market.

38 Budget airlines headed for

turbulence No all Asian budget airlines are the same, and while some are doing well others have business models and routes that are

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road

still unproven

44 HK banks’ China lending has

analysts worried Another banking storm might be brewing as HK banks continue heavy lending to troubled China.

10

fIrSt ChINA - CrASh or CrASh through?

38

buDget AIrlINeS heADeD for turbulANCe

FIRST 10 China - crash or crash through?

10 Singapore 2012: Watch the credit 14 Will the last bank to stop hiring turn the lights out

OPINION 17 Why Virgin needed a $1 million training simulator

21 Are you fully prepared for 2012?

25 When an ailing home sale appears

REGULAR 28 Numbers 50 Life and Style

perfectly healthy

37 Christmas: The festival of retailing?

41 Airports are the face of every country brand

For the latest business news from Singapore visit the website

REPORT

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A Christmas tale: The ghost of Rudolf von Havenstein appears over Asia

Tim Charlton

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6 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

Tim Charlton Singapore Business Review is available at the airport lounges or onboard the following airlines:

Editorial Enquiries If you have a story idea or just a press release please Email: sbr@charltonmedia.com and our news editor will read it. For a personal message to the editor put the word “Tim” in the subject line.

*If you’re reading the small print you may be missing the big picture

As Singapore prepares for the festive season and the Year of the Dragon, all looks relatively stable on the domestic front.

With tourists continuing to pump money through the economy and unemployment at close to record lows, what could go wrong? Well, if a ghost of Christmas past were to visit Singapore and tell a tale of warning, it could well be that of Rudolf von Havenstein.

Students of economic history will remember that as President of the Reichsbank in Germany in the 1920’s, it was he who ordered that additional Reichsmarks be printed in order to meet the government’s deficits. At the time many actually thought that printing cash would not end up being inflationary, but it ushered in hyperinflation, and we all know how that ended.

Europe now has debts that far exceed many countries’ ability to pay. If this crisis ends up being resolved byprinting more money, there will be a lot of people looking for safe currencies to switch to. The greenback is out as it continues to devalue as the printing presses run.

So the brunt is falling to smaller currencies, with investors rushing to diversify their currency portfolios, and the Singapore dollar is seen as a very safe, stable and, most importantly, value-holding currency. This may be great for those fleeing Euros and greenbacks, but it will continue to put major pressure on Singapore in 2012 for two reasons: a strong currency making Singapore a more expensive place in which to live and do business, and people wanting to put those Singaporedollars to work by buying property.

The government’s recent measure to slap a higher stamp duty on foreign buyers may help stem the problem, but 2012 will prove a difficult year for businesses that require a weaker Singapore dollar to remain competitive.

Singapore may want to be the Switzerland of Asia, but having its currency as the Swiss Franc of Asia is quite another matter for a country that relies so much on trade and cost competitiveness to stay in business.

7/30/08

11:05:28 AM

Singapore Business Review is available at the following clubs and hotels: American Club Hollandse Club Laguna National Orchid Country Club Raffles Country Club Raffles Town Club RSYC Seletar Club Sentosa Golf Club Singapore Cricket Club Singapore Island Country Club Swiss Club The Tanglin Club The China Club The Legends Fort Canning Park The Pines Club Tower Club Singapore Fullerton Hotel Grand Plaza Park Royal

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Hong Kong is Asia’s premier destination for world-class events. The return of the Cartes in Asia by Comexposium, the Asian Aerospace International Expo and Congress by Reed Exhibitions and the debut of Vitafoods Asia by IIR Exhibitions in 2011 all demonstrate AsiaWorld-Expo as a preeminent international exhibition platform. At the award-winning Hong Kong Convention and Exhibition Centre, the resounding success of ART HK by Asian Art Fairs Limited and Mines and Money Hong Kong co-organised

by Aspermont Limited and Beacon Events also reaffirms Hong Kong’s position as the trade fair capital of Asia.

EMpTy BOTTLES AND CANS ARE FuLL OF OppORTuNiTy Did you know that recycled beverage bottles can be recycled to come back as caps, T-shirts and chairs? So refresh yourself with one of our range of beverages and bring back the empty bottles and cans.

Give them back to us at Orchard Cineleisure B1, on Sat & Sun 12.30pm9.30pm, now till 31st Dec 2011, and we’ll swap them for cool recycled items, while stocks last! *terms and conditions apply.

8 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

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For more inFormation on eVents and adVertising

SiNGApORE TuRF CLuB Looking forward to embark on a voyage of culinary pleasure at lunch or enjoy a spectacular night after work with friends or business associates, you can adjourn to the chill-out lounge at V (China Square, Level 3).

V, a premier hospitality destination by the Singapore Turf Club. The perfect venue for any meet.

Please call 6879 1979 or email business_development@turfclub.com.sg for more information.

Co-PuBLISHED CoRPoRATE PRoFILE

Heads of the 3 entities that make up the Coca-Cola System in Singapore: Amit Oberoi, Antonio Del Rosario and Mauricio Avalos

Coca-Cola: Building business sustainability Antonio Del Rosario, General Manager of Coca-Cola Singapore, talks about the company’s latest sustainability agenda with the “Live positively” philosophy.

W

ith 125 years in the business, almost 140,000 employees and more than 3,500 beverages sold in more than 200 countries, Coca-Cola is undoubtedly the world’s largest beverage company.

Coca-Cola manufactures the concentrates and beverage bases and sells it to bottling operations. And Coca-Cola wants to ensure its continued longevity, by applying a lens of sustainability to all business decisions through a new, more holistic approach.

The ‘Live positively’ platform Recently, Coca-Cola Singapore launched a new initiative that integrates sustainability across its business.

Mr Del Rosario noted that Live Positively is Coca-Cola’s commitment to making a positive difference by making sustainability part of everything they do. “It’s not an ad campaign. It’s a philosophy of how we operate our business and how we interact with those around us,” he added.

10 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

The reason behind the approach According to Mr Del Rosario, with Live Positively, they’ve sharpened their focus in the areas where they have the greatest opportunity to create shared value for the communities they serve as well as for the company – areas like recycling and water and active healthy living. “We’re also making sustainability a more integral part of our business planning process. We get that people today are no longer choosing brands based solely on the quality of the product, but by the way the company behaves,” he added.

Coca-Cola is indeed transforming into a more conscious brand by paying close attention to sustainability. “With our packaging, for example, our vision is zero waste and we’re working to achieve this by light-weighting our bottles and cans, supporting community recycling and using more recycled and renewable materials in our packages,” said Mr Del Rosario.

Antonio Del Rosario, General Manager of Coca-Cola Singapore

Benefits of ‘Live positively’ Mr Del Rosario believes that with the intensified focus on sustainability, the Coca-Cola system in Singapore becomes a preferred employer, partner to customers, and beverage of choice for consumers. “Current and potential employees want to work with organizations that share their values and concern for sustainability. Customers want to partner with companies that have a sustainability focus. And research shows that consumers increasingly make purchasing decisions not just based on product quality and taste, but also on sustainability factors,” he added.

As Coca-Cola employs this new initiative as a company philosophy, achieving the goals of ‘Live Positively’ will indeed be a multi-year journey of continuous improvement. But with 300 bottling partners and millions of consumers all over the world, Coca-Cola may indeed be building its best company philosophy.

CoCa-Cola Singapore 457 Jalan ahmad ibrahim Singapore 639933 www.coca-cola.com.sg

“We’re also making sustainability a more integral part of our business planning process.”

FIRST further in 2012. “We expect only a modest drop in property prices and see limited impact on the household sector, but new starts could drop by 10-15%.”

To offset the fall in private housing, expectations are high that the government will funnel money into building public housing for the poor, people, much like what Hong Kong did in the 1950’s and 60’s with its programs and what Singapore continues to do today.

“Even with officially declining starts in social housing, we expect more real construction to occur in the coming 12-15 months. Ensuring sufficient funding, construction and delivering of social housing should be the top priority for the central government. Increased social housing construction can help prevent a hard landing in property construction and the economy, but not a significant slowdown in either,” noted UBS.

UBS expects new bank lending to rise from RMB 7.37.4 trillion this year to about 8 trillion in 2012.

China – crash or crash through?

T

can also re-open bank lending, which has been progressively curtailed throughout 2011 by constant raising of the reserve ratio.

What is China’s future?

China is unlikely to crash any time soon, with economists reckoning that growth may ease from 9.2 % to 8 % next year. The big picture is that while some Chinese exports to insolvent EU countries may be decreasing, the central government is expected to make up for the shortfall by opening the spending taps again.

The UBS economics team reckons fiscal policy will likely take the lead, with 1% of GDP in extra spending between now and the end of 2012, focusing on social housing and livelihood- related areas. But China

Bank lending the rise Chinaon 2012 Outlook (Charts) UBS expects new bank lending to rise from RMB 7.3-7.4 trillion this year to about 8 trillion in 2012, with SocialChart housing construction to prevent helpaprevent a Chart 7: Domestic demand to partly offset the drag from net 8: Social housing construction to help hard the central bank possibly needing exports landing hard landing to cut banks’ RRR to fund the credit Social housing under construction (million sqm) increase.Contribution to real GDP grow th (ppt) 18 1,200 Net Exports But what about all those ghost Gross capital formation 16 Asia Economics - Outlook 2012 30 November 2011 towns and the imminentConsumption collapse of 14 1,000 the Chinese property market? There 12 Singapore 2012 Outlook (Charts) 10 800 have already been some signs of a 8 falling property market, but analysts 600 attribute64that to the tightening of credit terms and availability, rather Chart 42: Intere 2 400 Chart 41: GDP growth forecast and UBS forecasts than to a0 lack of demand from -2 200 purchasers.

UBS noted that with 15.0 4.00 -4 the ongoing purchase and credit 10.0 -6 0 3.00 restrictions, private commodity 2005 2006 2007 2008 2009 2010 2011E 2012E 2008 2009 2010 2011E2012E2013E2014E2015E 5.0 2.00 housing sales and starts have Source: CEIC, UBS estimates Source: CEIC, UBS estimates Source: CEIC, UBS estimates weakened and are expected to fall 0.0 1.00

Singapore 2012: watch the credit

UBS F'cast

-5.0

UBS 7

12 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

0.00

Mar-12

Jan-11

Mar-10

Mar-08

Jan-09

Mar-04

Mar-06

Jan-07

Mar-02

Jan-05

Mar-98

Mar-00

Jan-03

Mar-96

Chart 10: Inflation keep policy easing makers may take action to does tonot, is forecasting that leverage related risks further down inflation will drop to under 3 % inIndex 2012. Inflation reduce RMB bn rate (% y/y) qoq seas. adj. % y oy 1100One thing that we are unlikely to 450 the road.”%May the borrower beware. see in25 Nominal new loans (sa 3mma) 1000 Overall CPI 2012 is government embarking on any 400 big Source: UBS, Haver, CEIC New loans/GDP (RHS) "Core" inflation 20 900 spending sprees to drive economic growth, Food and fuel There is little good news on the horizon 350 800 partly because it doesn’t want to reignite for the first half of 2012, with economists 300 15 700 Chart 43: CPI inflation and credit growth inflation, but also because there is just predicting the economy will actually 250 600 CPI inflation and credit growth not much spare labour around now that 10 contract as those indebted Europeans and 500 200 36.0 12.0 immigration has been tightened.

Americans go easy on the purchases.

400 % y oy 150 5 The big question for Singapore and the 27.0 9.0 Still, it could have been worse. If all goes 300 100 government is just how long credit growth 200 18.0 6.0 according to plan, Singapore will see a 2% 0 50 can In 100 continue outstripping GDP growth. overall growth rate for 2012, despite a bad 9.0 3.0 0 however to the risks posed0by the-5 first half. The big question for Singaporeans addition 0.0 2006 2007 2008 2009 2010 2011 0.0 2004 2005 2004 2005 2006 2007 2008 2009 2010 2011 global cycle, there is the possibility of policy is just how much higher accommodation -9.0 -3.0 adjustments Source: CEIC, UBS estimates to counteract excessive credit Source: CEIC, UBS estimates and COE prices can climb. By the end growth. UBS expects credit growth, which of 2011, inflation rates in SIngapore Bank credit (lhs) CPI inflation (rhs) is currently over 30%, to slow down along were running at more than 5%, but this Source: UBS, Haver, CEIC with economic growth.

“But in the event it looks unsustainable according to some Source: UBS, Haver, CEIC Jan-01

Chart 9: Credit conditions to be relaxed economists.

UBS for one

Jan-01

Asia Economics - Outlook 2012 30 November 2011

Bank re

Source: UBS, Haver

Chart 44: Curre 150 140 130 120 110 100 90 Jan-05

hose American hedge fund managers talking up their book on CNBC and Bloomberg hoping for the mother of all Chinese hard landings in 2012 may be in for a rude disappointment.

For Tra Ex

Source: UBS, Haver

est rates and banks’ required reserve ratio 12.0 10.0 8.0 6.0 4.0 2.0

eserv e to dep. ratio (rhs)

Jan-11

Jan-09

Jan-07

Jan-05

Jan-03

0.0

SIBOR 3m (lhs)

r, CEIC

ency and official FX reserves 400 350 300 250 200 150 100 50 0 Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

local currency appreciation

reign ex change reserv es (USD bn) (rhs) ade w eighted ex change rate: Index (2000 = 100) (lhs) change rate against USD: Index (2000 = 100) (lhs)

r, CEIC

FIRST

Will the last bank to stop hiring please turn the lights out

G

rim and grimmer may best describe the outlook for banking jobs in Asia.

All through the first half of 2011, about the only bank still hiring in numbers was rumoured to have been Standard Chartered. But even they too have now slowed down job hiring to a trickle.

More worrying still are reports heard on the streets of Singapore by your correspondent that at least two international banks are planning net headcount reductions over the course of 2012 – the first in living memory for many young bankers.

The reason is that while some more jobs are being offshored, in years past they would have been made up for by growth in other parts of the bank. But with global markets and investment banking business also in a hold or dive pattern, the outlook is really quite bleak.

After the 2008 crisis, much of the banks in Asia was immune from the kind of firings that were faced by their counterparts in the US and Europe. In fact, many expanded to create pan regional groups and in 14 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

the process went on hiring binges in back office and systems integration to weave together these disparate operations. But now as business slows down across the region, there is barely a bank hiring.

Unlike in 2009, when the industry was split between banks recovering and banks expanding, this time around, the economic climate has forced a broad retreat across the entire sector. Even banks like HSBC, which continued to hire as well, adding 5,000 staff in 2010, announced job cutbacks of 3,000 staff out of Hong Kong alone in the first half of 2011.

In investment banking, the deal volume has almost halved in 2011 compared to 2010, mainly on the back of delayed and lesser listings in Hong Kong. Credit Suisse is reported to be wanting to lose about 1,500 staff and Nomura around 700, and this is representative across the board.

But while job cuts and hiring freezes are to be expected in investment banking, even commercial banks are reining in their hiring expectations.

Credit Suisse is reported to be wanting to lose about 1,500 staff and Nomura around 700

A report by Reuters noted that even StanChart has said that most of its expansion is on hold as it tries to keep costs under control. High staff counts and overhead costs at StanChart’s investment banking operations, which fall under its wholesale banking division, have led to costs growing faster this year than income growth.

Still all this could be good news for regional banks who may be able to get some top talent not previously affordable to them. This is exactly what many of the Chinese banks did after 2008, when ICBC and China Construction Bank hired a lot of unemployed bankers to their wealth management businesses. And it is true that many of the wealth management businesses are still hiring relationship managers.

But compensation still remains an issue, with even out-of-work bankers likely to seek alternate employment rather than take home the kind of low salaries that non-Singapore and Hong Kong banks tend to pay. ICBC’s outgoing Chairman Jiang Jianqing made only $150,000 in 2010, barely 0.5 percent of JPMorgan CEO Jamie Dimon’s $20 million paycheck, noted Reuters. Still, for many local banks across the region, the timing have never been better to hire top talent.

opInIon

richard branson

Why Virgin needed a $1million training simulator

H “...our experience shows that the best solution is to provide people with the skills and confidence they need to deal with problems on their own, without sticking to a script or following a flow-chart.”

ow a new company treats its customers is often the deciding factor in whether it will be successful. Great businesses – the ones who have gotten it right – are good at turning customers into advocates for their companies.

Many of the world’s most successful businesses provide terrific customer service. The adulation some of Apple’s established customers have for the brand and its products is not only a result of the company’s ground-breaking innovations; those products were backed by top-notch customer service. The retention of customers is important to any company. After all, it makes more sense to keep the good customers you have than to continually chase new ones.

I was recently reminded of how important customer service is for all businesses, both new and established, when I visited Virgin America to open their training simulator in Burlingame, California, just outside San Francisco. At Virgin, where our brand is built on the promise of providing terrific service, our flight crews are our most important asset – without them we would be just another airline. The new $1 million simulator is crucial to our expansion plans.

Not every business needs to build a training facility. Indeed, many do not need high-tech solutions. But after reconnecting with the team at Virgin America and seeing how they go about training their new employees, I came away with three key lessons that can be applied at any company, whether it is a Virgin operation

or the start-up you’re planning to launch.

An investment in your employees is an investment in your company All airlines must ensure that everyone on staff, from pilots to ground workers, have rigorous operational, safety, security and even medical training, but at Virgin America, that’s just the beginning. Our staff must also complete a broader immersion in brand values through a twoday annual “brand bath,” which the company calls Refresh. At those retreats, they focus on improving customer experience across the airline.

As an entrepreneur, how can you bring your team together to solve problems and build their trust in each other? At a small business or start-up, this might be accomplished with a low-tech solution, like starting a tradition of eating lunch together and talking about how work is progressing.

Lead from the front At Refresh, David Cush, the CEO of Virgin America, often holds question-and-answer sessions with employees to ensure that he personally addresses their concerns. This is the first step in building bonds between front-line staff and senior managers, which helps to create easy and open communications.

At other companies, executives and managers who want to learn how to improve their operations must step away from their desks and get to know their staff. If your company is too big for regular meetings, spending a few hours handling customer complaints yourself or working on the factory floor

will help you to understand what’s really going on and also to break down the silos that can emerge in some businesses.

Make sure employees have the tools they need to succeed The training at Refresh teaches Virgin America employees to learn how to solve problems on their own – a key to great customer service. This is an unusual approach. Most businesses impose restrictions on their staff in terms of the types of problems employees can solve and the authority they have to do so. But our experience shows that the best solution is to provide people with the skills and confidence they need to deal with problems on their own, without sticking to a script or following a flow-chart.

Most often, what’s missing is information. If, in your meetings with your staff or during your time on the factory floor, you notice that employees are groping for answers, it is time to take action. Remove limits on access to databases; invest in new information technology; do whatever it takes to make sure that they can take initiative on their own.

Celebrate successes in internal communications, to encourage others.

In tough times, when your competitors are cutting costs, it might be tempting to follow their lead and cut back on customer service. But remember that slashing prices is not the only solution. Every customer is valuable; in the long term, a thriving company is built on relationships, not just the bottom line. © 2011 Richard Branson/Distributed

by The New York Times Syndicate.

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 17

Co-published Corporate profile

Manulife – a new home and a bright future Manulife Singapore is setting the benchmark for customer service. Simon Hyett discovers exactly how the Canadian MNC plans to maintain its top spot.

W

hen the founders of Canada’s Manufacturers’ Life Insurance Company established their organisation in Toronto over 120 years ago, they would have never envisioned their company - founded on the principles of Calvinistic, working-class ethics - would one day control C$492 billion (S$620 billion) assets under management as at 30 September 2011, a figure that equates to 30% of Canada’s GDP. Neither would they have foreseen the establishment of a small office, over a century ago, next door to HSBC on Shanghai’s Bund, nor that one day it would trounce its behemoth American and European competitors in terms of customer service.

Modesty and humility is part of the Canadian psyche, says Melbournian President and CEO of Manulife Singapore, Annette King. “The flipside however of being a quiet achiever is that your brand name may be under-recognised.” Nonetheless, if the fundamentals are there: financial strength (Manulife boasts a capital adequacy ratio of 390% versus the MAS mandated 120%), a world-wide scattering of towering skyscrapers; peerless product innovation and customer service awards in support;

Manulife returning to basics with its medium term marketing strategy

18 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

then building reputation and brand recognition will naturally follow.

Differentiators speak for themselves “We’ve returned to basics with our medium term marketing strategy,” says King. “The first stage is simply securing our name in the minds of the general public.” The marketing plan has been rolled-out with gusto - the emerald green “building block” – that represents strength, reliability, trustworthiness and forward-thinking – appears everywhere across the nation in business newspapers, on taxis and buses. Having recently taken naming rights to formerly Plaza By The Park on Bras Basah Road, an arterial cutting through Singapore’s CBD, Manulife is undergoing the greatest of brand building exercises. Speaking from level 9 of the re-minted Manulife Centre, King explains, “We are here in the centre of the city, easily accessible to all our clients, be they first time investors or high–net worth individuals – we are here to help them secure their futures.”

The second stage of Manulife’s marketing strategy involves articulating to the market exactly what services Manulife can provide and how it can make a significant difference by helping clients achieve their financial goals, and the final

stage involves differentiating from its competitors. Customer service excellence is clearly the key differentiator for Manulife Singapore. Guided by a customer experience compass called “Customer PRIDE”, Manulife Singapore topped Singapore’s recent Customer Satisfaction Index of Singapore in the financial services sector, scoring 68.5 points against the sector average score of 66.2 and national average of 67.2 for all industries surveyed.

The CSIS is an annual survey conducted by the Singapore Management University’s Institute of Service Excellence. “Our position and affirmation as the charttopper for customer service in the financial services industry is a testament to our client-centric approach,” adds King. “But of course we won’t be resting on any laurels, we shall continue to do better, work harder and reach further for our clients.”

The worrying truth in Singapore However, King and her team are not willing to win awards by pulling punches with their customers, in fact quite the opposite, Manulife’s financial planners are duty-bound to highlight the hard and unsettling truth with respect to Singaporeans’ retirement savings. We all know Singapore has the third lowest birthrate in the world, Singapore’s population is not replacing itself organically, and the burden on the Sandwich Generation has turned all X-Gens into workaholics-by-necessity.

What we are not so aware of is the fact that the average Singaporean’s CPF will last merely one year post-retirement yet that individual will live up to an average of 20 years post-retirement.

Of course the Grey scenario doesn’t have to be that bleak. With proper financial planning the burden on the current and future generations is greatly reduced. “We are fighting a battle in challenging times and we’re winning,” says King proudly. “Our customers are surprised to hear that they are perhaps 90 to 95% under-planned. But when they invest a few hours to speak to our planners and buy into a product that is right for them, our job of securing their

Co-published Corporate profile

Annette King, President and CEO of Manulife Singapore

future starts.”

Singaporeans remain cautiously optimistic Not only is the average citizen grossly under-planned for retirement, they are also 65% underinsured. These statistics coupled with the fact that banks pay very low interest rates highlights the extent to which financial planning has become a life necessity. “Inflation is 5% and interest rates are near zero, so while it is admirable to save, it is incorrect to think that this is a way to build wealth.”

Nonetheless, one might imagine that in such volatile times, customers will continue to hold cash and that putting their savings in the bank is the responsible and cautious route to take. This assumption is not the case – the paradox is that financial planners are not witnessing the same level of caution that they saw in 2009. “We are not seeing the customer nervousness that we observed a couple of years ago, even considering the US debt crisis and the economic calamities befalling Europe. We believe that this is because investors at all levels are better educated than when the global financial crisis hit and understand that short term cycles don’t affect longterm growth.” Manulife Singapore is a proven beneficiary of this metered public optimism. Total weighted new business grew 68% to register S$22.2 million in the third quarter compared to the same quarter last year. This increment is 3.7 times higher than the life insurance industry growth rate of 18%, according to data from Singapore’s Life Insurance Association recently.

Financial literacy still remains an issue, however, and all industry stakeholders including the Government know it. “The Government drives education programmes; the industry in general runs programmes through the Life Insurance Association, and thirdly at the company level, we aim to improve understanding through our professional financial planners, marketing and advertising programmes.” At the client level, the focus on individual needs is unparalleled, each of Manulife Singapore’s one thousand financial planners coach and help their clients to map out and adhere to a financial plan based on their unique requirements. “Our financial planners

use PLAN RIGHT ™ - a unique financial planning tool to help identify clients’ goals and ensure they make the right choices according to their life needs.”

Long-term view, long-term growth In this volatile economy, the key is to stay calm and ride the tide, according to King.

Singaporeans need to trust that despite the current economy, in 25 years time, their investments will have grown and outpaced inflation, especially in the fiscally wellmanaged economy of Singapore. While the regulatory system in Singapore is tough and the market is highly competitive, the strict regulations is all of benefit to the consumer and the competitive environment pushes the best players to seek new opportunities and to innovate.

“The key opportunities in our industry are two-fold - to protect current wealth and save for retirement,” adds King, and as the Population Pyramid continues to skew this is only going to become more so the case.

Manulife takes a holistic approach in planning for their clients’ financial future that caters to their different stages in life such as planning the finances for a wedding, buying a first home, financing children’s overseas education and retirement planning. Good financial planning is most likely to address all those aims in congruence. “Financial planning is simply a means to an end,” says King.

“Good financial planning is the pathway to the goal of achieving financial freedom.

Full financial freedom means that people can do what they want now and in retirement.” Manulife’s holistic strategy looks at four focus areas. Protection – this ensures that the family, home and health care needs are well taken care of. Wealth Management – assisting customers to accumulate, grow and preserve their wealth. Retirement – meaning a consistent

stream of income to maintain the lifestyle during retirement. High-Net Worth Market - Manulife also offers financial solutions for those lucky few that fall into the high-net worth market segment.

Service is key What are great products without sound advice and personalised service? Manulife recognises that while product innovation is important, creating a first-class client experience is also imperative. “We want to be the leader in terms of the client experience,” says King.

Manulife has been in Asia for over 110 years. With the opening of its new Manulife Centre in the heart of the city that includes a Client Service Centre on the ground level, this represents another milestone in the continuous growth of the company. “Being in this central location gives us greater proximity to our clients. As a forward-thinking and reliable company, we have expanded to serve them better,” says King.

“We want to be number one in the minds of our clients and the public. At the same time, we aim to double business by the end of 2014. Simply put, we are positive about the sector because of the myriad opportunities - Singapore is growing by every measure,” concludes King.

Humble people with ambitious goals – perhaps a perfect blend of characteristics for those entrusted by their customers to be custodians of their financial future.

“The key opportunities in

our industry are two-fold to protect current wealth and save for retirement.”

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 19

vox pop: hIRIng ouTlook

Hired or fired?

With unemployment hitting 2% in September and with some industries looking to shed some workers from November, what does 2012 hold in store for Singapore’s employees?

William Willems Regional Vice-President Regus Our most recent business confidence research found that despite suffering a dip in confidence over the 6 months to September, more than half or 68% of Singapore companies report that they plan to increase headcount in the next two years. Recent government figures support this.

The unemployment rate was just 2% in September 2011, and ironically even the Department of Statistics is advertising open roles on its home page!

Balancing the risk of a global downturn, with existing needs to cater to demand will be a challenge for both employers and their staff. How are businesses and workers reacting? Well, firstly there is a clear move toward more flexible working practices. Half of Singapore companies say they plan to hire more freelance staff and 32% will employ more remote workers in 2011/12. This approach will give employers the opportunity to rapidly scale their operational ability, and control both their headcount and overheads.

Flexible work arrangements will hopefully go some way to helping them find a better work-life balance. With 54% of Singapore firms looking to hire fresh graduates over the next two years, companies will be firmly focused on attracting and retaining young talent. stella Tang Associate Director Robert Half Singapore Although the wider labour market has tightened slightly, there is still robust demand for financial professionals in

regional vp

associaTe direcTor

regional direcTor

William Willems

Stella Tang

Karin Clarke

Singapore compared to the rest of the world.

In Singapore, Robert Half has noted a 40% increase in candidate applications for jobs in the finance sector in the past 12 months. Qualified professionals are confident about securing good positions and are still gunning for salary increases of at least 10% to 20% to move to another firm.

Employment demand is still good for banking professionals, particularly in risk, compliance and audit.

Robert Half has received 5 to 10 times more CVs from candidates in the West seeking to work in Asia in the past 12 months.

He has also noted an increase in demand for contract workers as companies embark on project-based transitions, which is an ongoing trend.

Such flexible staffing provides firms with immediate access to talent with specialised skill sets and gives organisations the ability to upscale and downscale staffing levels in line with business needs.

Although reports of international banks slashing jobs have made headlines, the organisations in question are often trimming their headcount in traditional Western

markets while expanding in Asia, albeit at a slower pace than predicted, as this remains the world’s growth region.

For most companies, year-end is traditionally when they perform headcount planning, so we expect to see some retrenchments of under-performing businesses and individuals. A certain level of cautiousness in hiring is expected at the start of 2012 until firms gain more clarity on global economic conditions.

Although the Ministry of Trade and Industry recently predicted 2012 growth figures to 1% - 3%, the Singapore job market should remain stable as companies understand the importance of retaining key talent in good times, and bad.

In the financial sector, there will be a continued demand for back and middle office talent as an increasing number of Western financial institutions move their operations to Singapore. With the increasing regulatory requirements, risk and audit functions are also in high demand.

Rather than making cutbacks, companies based in Singapore are still hiring – but taking a different approach. Compared with the aggressive hiring and rampant poaching seen in certain sectors before the last peak, companies are making more considered hires and taking a little longer time to come to a decision.

While there are some cautionary indicators at present, we believe that hiring will remain buoyant in 2012 and we’re likely to see slight easing from this year’s peak unemployment rates.

Certainly, we expect to see continued demand for strong, capable leaders over the longterm as international companies look to Asia to achieve growth. Our recent World of Work Report found that three in five, or 59%, of employers say developing leadership skills for the next phase of growth was their biggest productivity challenge.

By creating an agile, lean workforce, developing in-house leadership and upskilling their current workforce, organisations can work with the ebb and flow of the business environment, and maintain a competitive advantage in times of slow activity.

20 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

Karin clarke Regional Director – Singapore & Malaysia Randstad

opInIon

Are you fully prepared for Year 2012?

Director Livewir3!! Communications Pte Ltd

Kelvin Chan > Leaders and Decision makers take heed!

It’s no secret. The gloomy news of the world economy spell a less than easy Year 2012 indeed!

In the current marketplace where every one of your competitors will be making strategic moves to secure their market share, what you do will be essential for your business to tide over a difficult year, for some it will be vital towards survival.

Here are 3 Marketing actions to check-off on your To-do list 1) Fire that under-performing Social Media

consultant!

It’s quite simple why you think you should do so. If all they have done in the year or more is talk about applying new “wow” technology, guaranteeing results and not focusing on building a community around your business then all they have done is waste your resources.

Your business must take time to show your customers – the people you intend to be a community – that you care.

2) Brand differentiation with Corporate Social Responsibility Link up at least one of your Marketing activities with CSR. If you have not done so, integrate CSR into your business model.

This will not only give your business another unique selling proposition, but also separate you from the competition and your brand will resonate in the minds of customers. Can

you afford not to?

3) Focus your marketing activities to focus on customers Google’s philosophy is “Focus on the user and all else will follow.” Google clearly knows how crowded the Internet is, yet focusing on their users gives them a distinct direction with a clear objective: Providing with the best user experience.

In your industry, every one of your competitors will be shouting out and reaching out to customers; your target customers will be easily distracted.

It is therefore highly critical to attract their attention rather than joining the noise.

Whether you create a viral campaign, re-position your brand, get on different social media platforms such as Google + or creating a PR event…if you focus on what your customers want and need, “all else will follow.”

Swiss quality also stands for knowledge.

Ensuring your success with global mailings.

Swiss Post offers you cross-border mailing options to make your business even more successful. You can count on us for daily mail, direct mailings, newspapers, magazines and small consignments.

With our flexibility, innovativeness and reliability we are your partner for international mailings. Further information available at number +65-6748 4484 or at www.swisspost.com.sg

Excellence delivered.

GAME CHANGERS an “on- demand basis.” In this setting, consumers are more likely to engage doctors at a much earlier lifestage and disease stage and thus preventive healthcare is possible and epidemiology collected from this more conducive setting, similar to a home environment, can provide new direction to many medical researches.

The healthcare 1.0 is doctor-centric and the government has to solve many logistical issues as the demand for health services increases. The healthcare 3.0 model is one centric where a borderless supply of doctors and health services can support consumer’s demand.

There is an app for that

A vision for Healthcare 3.0 Dr Wei Yu Siang hopes to usher in borderless healthcare with a vision for Healthcare 3.0 SBR: What’s the big picture for healthcare?

Dr Wei: On a macro sense, we are talking about a gold rush where most of the healthcare expenditure will triple over the next few years. In Singapore, it will go from 4% to 8% of GDP over the next 5 years, whilst in Indonesia, it will go from 3% to 7%.

In the US, healthcare spending is close to 20% and will rise further, so there is a lot of room for growth in Asia.

When you have a silver Tsunami combined with insufficient healthcare infrastructure, there is a great demand for healthcare 3.0 in countries like Vietnam, China and Indonesia. Over the next 5 years, not only will Asia become the largest healthcare buyer in the world, it will become a very intelligent buyer.

SBR: What is Healthcare 3.0?

Dr Wei: Healthcare 3.0 will be the state where healthcare is consumer-centric, clickable with doctors-on-demand service. The current traditional model(healthcare 1.0) is a hospital-centric model where a patient goes to the doctor with symptoms and signs of a disease. We are now at the state of healthcare 2.0 where technology like electronic records and telemedicine assist the operations of a hospital or clinics. Most of the apps on mobile phones and websites are content-heavy and not interactive.

The near future model will be the healthcare 3.0 model where consumers stay at home or use their mobile gadgets to access healthcare. This model will allow doctors to “surround” consumers and offer a service on 22 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

SBR: What are your current activities in the healthcare technology, media and telecommunication space?

Dr Wei: As I said, we are living in the era of healthcare 2.0 moving to 3.0, and we are helping many public policy makers, health service providers, and doctors implement health technology, media and telecommunications (TMT).

We are providing the whole healthcare industry a plug and play ecosystem to use our tertiary grade medical call centre with cloud-based telemedicine capability, digital concierge platform, mobile apps, second opinion network, medical tourism portal, homehealth systems etc. This way, all the healthcare players can tap on the TMT revenue with us.

We believe that for every dollar earned at the clinic, there are another 10 dollars or more that can be transacted via e-services when players start to adopt TMT space. Consumers are ready for this, so we hope to help them catch up with the new order of new healthcare consumerism.

SBR: What are your plans for Health Valley?

Dr Wei: Health Valley is a notion of Asia’s healthcare becoming a growth engine in the world which is inevitable as the region’s healthcare expenditure doubles and triples.

The website www.healthvalley.asia will be launched in the first quarter of 2012 where healthcare, investment, technology and public policy experts will aggregate to spearhead healthcare TMT trends.

We will be developing a new breed of medical centres, including healthcare TMT Towers in Iskandar and Markassa in Malaysia and Indonesia, respectively.

This tower will be a combination of a medical centre, a call centre, a mobile health lab, a cloud computing centre.

Each of these towers will take 10-20 million to build and we have already securitised the land. Such development will be part of Health Valley initiatives, where healthcare 3.0 takes centre stage in the region’s healthcare revolution.

We think Iskander in Malaysia will become a Silicon Valley of health – a Health Valley – and we are building a multi-storey integrated medical facility. On the ground floor is a medical centre, which is nothing unusual but it gets more interesting the higher you go.

On the next floor we plan to have a medical call centre and above the call centre is a mobile health development laboratory and above that is a cloud computing/ telemedicine centre and above that is a media centre. So the whole building is really stacked to deliver healthcare 3.0. We already have the land and $10 million invested and are very excited to pioneer healthcare 3.0 in Asia.

PROPERTY

Top residential transactions LOCALITY

PROJECT NAME

ARC AT TAMPINES OCR PARC VERA OCR REGENT RESIDENCES RCR ESTE VILLA OCR A TREASURE TROVE OCR REZI 26 RCR EUHABITAT OCR THE MINTON OCR SEASTRAND OCR THE SEAWIND OCR BLOSSOM RESIDENCES OCR BOATHOUSE RESIDENCES OCR RANGOON 88 RCR

AUSTVILLE RESIDENCES OCR

BLISS@KOVA OCR THE LUXURIE OCR LUXUS HILLS OCR RIVERPARC RESIDENCE OCR THOMSON GRAND RCR WOODHAVEN OCR THE MILTONIA RESIDENCES OCR VACANZA @ EAST OCR WATERFRONT ISLE OCR SUITES @ PAYA LEBAR OCR RIVIERA 38 RCR TERRASSE OCR THE CANOPY OCR THE LAKEFRONT RESIDENCES OCR D’LEEDON CCR SUITES 28 RCR PAVILION PARK (PHASE 2) OCR REFLECTIONS AT KEPPEL BAY RCR SKYLINE RCR THE MEYERISE RCR WATERVIEW OCR CENTRO RESIDENCE OCR EIGHT COURTYARDS OCR PARC BLEU OCR TREASURES@G19 RCR 38 I SUITE RCR FORESQUE RESIDENCE OCR LE REGAL RCR OKIO RCR VIENTO RCR ASCENTIA SKY RCR BUCKLEY CLASSIQUE CCR FLAMINGO VALLEY OCR MY MANHATTAN OCR SILVERSEA RCR THE PEAK @ CAIRNHILL I CCR THE URBANITE RCR UBER 388 OCR CASHEW HILL OCR LANDED HOUSING DEVELOPMENT OCR MARINA BAY SUITES CCR NV RESIDENCES OCR PARC ELEGANCE OCR HIJAUAN CCR NEWTON EDGE CCR SCOTTS SQUARE CCR SKYSUITES @ ANSON CCR SOLEIL@SINARAN CCR Source: Urban Redevelopment Authority

DEVELOPER

Hoi Hup Sunway Tampines Pte Ltd Sim Lian (Hougang) Pte Ltd Golden Villa Pte Ltd Kedron Investments Pte Ltd Sim Lian JV (Punggol Central) Development 26 Pte Ltd Transurban Properties Pte Ltd Peak Garden Pte Ltd Precious Sand Pte Ltd Bayshore Green Pte Ltd Grand Isle Holdings Pte Ltd Easthouse Properties Pte Ltd Kay Lim Investment Pte Ltd MaxLee Development Pte Ltd BBR Kovan Pte Keppel Land Realty Pte Ltd Singapore United Estates Pte Ltd Qingjian Realty (Punggol) Pte Ltd Luxury Green Development Pte Ltd Tampines Court Pte Ltd Hoi Hup Sunway Miltonia Pte Ltd Hoi Hup Sunway Property Pte Ltd FCL Peak Pte Ltd Fragrance Properties Pte Ltd Eastwood Green Pte Ltd MCL Land (Serangoon) Pte Ltd MCC Land (Singapore) Pte Ltd Keppel Land (Mayfair) Pte Ltd Morganite Pte Ltd Wenul Properties Pte Ltd Bukit Batok Development Pte Ltd Keppel Bay Pte Ltd Bukit Sembawang Hong Leong Holdings Ltd Sim Lian (Tampines One) Pte Ltd Eunos Link Technology Park Ltd Yishun Gold Pte Ltd Precise Development Pte Ltd JK 989 Development Pte Ltd Sustained Land Pte Ltd Wincheer Investment Pte Ltd Fragrance Realty Pte Ltd Tiara Land Pte Ltd Endo Properties Pte Ltd Winpride City Developments Ltd FCL Estates Pte Ltd CEL-Simei Pte Ltd Marina Green Ltd T G Development Pte Ltd Hertford Development Pte Ltd Caseldine Investments Pte Ltd Lucky Realty Co Pte Ltd JBE Holdings Pte Ltd Marina Bay Suites Pte Ltd Hong Realty (Private) Limited Fragrance Realty Pte Ltd SDB Asia Pte Ltd Macly Capital Pte Ltd Wheelock Properties (SG) Ltd Arcadia Development Pte Ltd Riverside Investments Pte Ltd

24 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

PROPERTY TYPE Exec-Condo Non-landed Non-landed Strata-landed Non-landed Non-landed Strata-landed Non-landed Non-landed Non-landed Exec-Condo Non-landed Non-landed Exec-Condo Non-landed Non-landed Landed Exec-Condo Strata-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Exec-Condo Non-landed Non-landed Non-landed Landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Landed Landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed Non-landed

TOTAL UNITS NO. OF LAUNCHED UNITS IN IN THE PROJECT MONTH 574 0 452 190 180 180 121 121 882 92 106 106 748 2 1145 0 18 473 61 222 0 602 0 493 48 48 0 540 25 140 50 622 21 288 0 504 0 361 0 337 0 410 0 473 0 561 0 99 36 102 0 414 0 406 0 629 150 1715 0 64 14 264 0 1129 10 283 0 239 0 696 8 329 0 654 10 55 27 27 0 120 0 496 0 88 0 104 0 48 6 373 0 64 0 393 0 301 0 383 7 52 0 46 0 95 10 25 0 17 4 221 0 642 0 157 0 41 0 104 4 338 0 360 0 417

MEDIAN UNITS PRICE SOLD ($PSF) IN IN THE MONTH THE MONTH 729 149 840 144 1321 128 614 121 914 103 1161 90 1207 61 914 49 952 41 1462 39 697 37 947 36 1461 35 705 33 1383 26 1059 26 1517 21 665 20 1214 20 1030 19 855 17 1119 17 1055 15 1343 13 1154 11 890 11 676 11 1079 11 1577 10 1096 10 813 9 1739 9 2010 9 1889 9 892 9 1460 8 815 8 1356 8 1336 8 1408 7 1097 7 1257 7 1711 7 1146 7 1432 6 2143 6 1263 6 1185 6 1668 6 2965 6 1480 6 1447 6 1899 5 1206 5 2545 5 846 5 1042 5 2329 4 1182 4 3710 4 2136 4 1600 4

PROPERTY

krisana gallezo When an ailing home sale appears perfectly healthy

T

he number of private home sales, excluding executive condos, in October dipped by 15% MoM to 1,387 units, which was blamed as usual on uncertainties in the global economy affecting buying sentiment. At face value, the figure does not appear worrisome since it still falls within the current conventional definition of a “healthy” monthly developer sales level of 10001500 units.

R’ST Research however sees differently, noting that while buying momentum continues, the bias will be mainly for small-sized apartments which is posing a challenge to the reliability of the measure we use in gauging the state of the property market. “I would reckon a very important issue is whether there should be a new benchmark for monthly healthy or robust home sales, given that sizes of homes have generally shrunk. 1,000-1,500 units may traditionally mean moderate monthly sales activity, but it may be a different case going forward since homes sold could be expected to be significantly smaller and units available for sale will increase,” argues RST Research Director Ong Kah Seng.

Mr. Ong adds that the number of units available for sale or already released can be inflated by smaller apartments, where even if the total sale of smaller units is accumulated and fits into the traditional healthy range, there is still a substantial amount of development floor area left unsold. According to Ong, monthly take-up could exceed 70%, translating to developer sales of about 900 to 1,200 units each month.

Why are small-sized apartments getting more popular?

In October, one key project was the Regent Residences at Serangoon by Golden Villas, which managed to sell 71% of its 180 units, even as the project comprises largely of small one- to twobedroom units. One-bedroom units are 409 sqft in size, while two-bedroom units only range from 667-861sqft.

“From a low of $2.64 psf in 2009, rents in the RCR rose 19.3% to $3.15 in 2010 and to $3.36 psf in Q3 2011.”

Singapore Business Review’s spot-check with property agents at Huttons Real Estate Group found that the 71-unit apartment, of which the smallest one-bedroom is only 309sft in size, managed to sell all but two penthouses at the end of the launch date.

krisAnA gAllezo Senior Reporter krisana@charltonmediamail.com

Total Shoebox units transacted (Quarterly Basis)

SOURCES: URA Realis, R’ST Research

A recent study released by iProperty showed Total No. of Shoebox that shoebox apartments accounted for 7% of Apartments Transacted condominium sales in 2011, up from the previous year’s 4.2%. On average, 197 shoebox units were transacted per month between August 2010 and August 2011, with their average price at S$1,546 psf.

The price is 42% more expensive than S$1,090 psf for condos from 501 to 1,500 sq ft, and 25% more than S$1,232 psf for condos larger than 1,500 sq ft.

Investment-wise, small-sized apartments are indeed proving profitable. CBRE’s latest analysis of residential non-landed rents points to a steady increase in rents in the Rest of Central Region since the rental market bottomed out in 2009. According to Li Hiaw Ho, CBRE executive director for research, the increase in rents in the RCR corresponds to the rise in the number of small-format sized apartments in Serangoon, Balestier and Geylang over the last few years. From a low of $2.64 psf in 2009, rents in the RCR rose 19.3% to $3.15 in 2010 and to $3.36 psf in Q3 2011.

Developers are expected to roll out more projects in the final two months of 2011 to ride on the current buying momentum. Collier’s International expects developers to be selective in their project launches, taking into consideration the uncertainties in the global economic arena and buyers’ price sensitivity and affordability thresholds.

CapitaLand is expected to launch its 99-yearleasehold, 538-unit Bedok Residences in November.

Other projects include UOL and SingLand’s 577unit development by the Bedok Reservoir and MCC Land’s 400 plus-unit residential project in Sembawang.

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 25

AbACuS

Is the boat sinking?

SingTel: Threatened by NBN?

Will singTel be slammed by nBn? Well, apparently not, as DBS refutes popular perception that national broadband network will hurt SingTel - but on what grounds?

A

ccording to Sachin Mittal, an analyst from DBS Group Research, the market is overly worried about the threat from NBN. To prove his point, Mr Mittal cited three factors. “Porting limit of only 2400 connections per week for NetCo implies that full migration will take at least 8 years; NBN is not reaching fully inside corporate buildings due to resistance from building owners; and most importantly, SingTel gets 75% of NetCo revenue for allowing NetCo access to its network,” he said.

Though worries of SingTel being slammed by NBN are overdone, the telco’s net profit still slumped 3.8% QoQ to $881.5 million in 2QFY12. OCBC Investment Research analyst Carey Wong noted that one of the main reasons for the fall in net profit was due to disappointing associates after-tax earnings, which dropped 15.5% YoY and 16.2% to S$347.6 million.

“Management explained that their underlying performance had been strong but contributions were negatively impacted by the stronger SGD and fair value losses,” she added.

SingTel is also facing some headwinds from the land down under. According to Mr Mittal, Optus is facing intense competition as both Telstra and VHA have launched aggressive iPhone 4S plans, forcing Optus to follow suit. “All telcos are offering extra subsidy of A$100 on mid-tier plans. Also potential cut in mobile termination rate in 2012F may have minor adverse impact,” he added.

But according to DMG & Partners Research, Optus’ revenue momentum is slowing down. However, the SingTel subsidiary displayed commendable operational tenacity despite stiff competition from Telstra and Vodafone. “Optus expects the pricing pressure and competition to continue for some time, but the group will continue to exercise cost vigilance with the focus on innovative offerings to mitigate any ARPU downside,” it added.

26 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

SOS: COSCO sinks with depressing net profit The company announced a 41.6% decline in net profit attributable to equity holders from S$55.1 million in Q3 2010 to S$32.2 million in Q3 2011.

According to Janice Chua, an analyst from DBS Group Research, the 3Q11 results fell short of market expectations by 30%. The culprit? It’s the margin decline for the offshore segment due to cost overruns.

“Cosco provided S$47.4m for potential losses arising from penalty for late delivery for a project, extra cost on design modification and higher-thanexpected equipment cost. As a result, offshore gross margin fell to <5% from 9% in 2Q11,” she added.

CIMB analyst Lim Siew Kee even tagged the offshore projects as a ‘nightmare.’

Worse, she expects more provisions for project losses in the next 12 months as COSCO executes more of its offshore projects. “This division was barely profitable in 3Q11 with gross margins of less than 5%, weaker than shipbuilding’s 8%,” she added.

As a result of the depressing turnout of COSCO’s offshore projects, DBS cut its FY11-12F earnings by 15-16%. “We have trimmed FY11-12F net profit by 15% and 16% respectively after lowering offshore margin by 1.0-1.5ppt and reducing order win assumption for FY11 by US$500m to US$2bn,” said Ms Chua.

CIMB also turned bearish on new orders for COSCO. Ms Lim noted that YTD new orders are US$1.9bn, mostly secured in 1H11. However, management

SG Bus fares to increase?

was unable to provide clarity on its order outlook except for two pipelay contracts worth US$230m from SapuraCrest, which could be made effective soon. “We keep our order targets of US$2.2bn, US$1.5bn and US$2bn for FY11-13,” she added. However, Ms Chua warned that about half of Cosco’s order book is from Europe, including Greece, raising risks of delayed payments or cancellations.

ComfortDelGro lost money in 3Q11 A fare raise among Singapore buses may be looming around the corner as Joshua Low, an analyst from DMG Partners & Research, noted that ComfortDelGro had overall good results but the one standout difficulty was Singapore buses which actually lost S$42k in 3Q11 on higher fuel prices excluding advertisement and rental income.

Obviously in Singapore, everybody’s pressured to keep rates low to prevent unnecessary fare hikes in the future.

The company’s bus segment growth in Australia was offset by still weak performance from its Singapore bus segment which reported EBIT of S$7.2m.

On the flip side, CIMB analyst Lee Wen Ching noted that CDL’s cost management in 3Q11 was impressive. Curtailed operating expenses helped offset an inevitable jump in energy costs, up 26% yoy. “Revenue grew 7% yoy during the quarter, supported by all segments. Operating profit grew by a similar 7% as EBIT margins held steady,” she added.

NuMbERS

When it comes to gadgets, the iâ&#x20AC;&#x2122;s have it But the spending goes on no matter what

Trends showing forfor hothot items Trends showingstrong strongpickup pickup items

But the spending goes on no matter what Laptop/Notebook

Mobile phone

Private car

Alcohol

%

70

Laptop/N otebook D igital video camera LCD TV/Plasma TV

% 60

100

Smartphone SLR digital still camera H D TV

50

80

40 60

30 40

20 20

10

Q2'11

Q1'11

Q4'10

Q3'10

Q2'10

Q1'10

Q4'09

Q3'09

Q2'09

Q1'09

Q4'08

Q3'08

Q2'08

Q1'08

Q4'07

Q3'07

Q2'07

Q1'07

Q4'06

Annual Release Up To ...

Sources: PAX 1997; 7 markets; PAX Q3 2010 to Q2 2011; 10 markets excluding Tokyo.

Sources: PAX 1997; Affluent Sample; 7 markets; PAX Q3 2010 to Q2 2011; All Affluent; 10 markets excluding Tokyo.

Q3'06

Q2'06

Q1'06

0 Q4'05

Q3 '02 Q2 '03 Q2 '04 Q2 '05 Q2 '06 Q2 '07 Q2 '08 Q2 '09 Q2 '10 Q2 '11

Q3'05

'01

Q2'05

'00

Q1'05

'99

Q4'04

'98

Q3'04

'97

Q2'04

0

Source: 10 markets excluding Tokyo.

Source: 10 markets excluding Tokyo.

Some devices have become near necessities

Ownership of tablets and e-readers

Chart 1: Time spent online (hours per week)

20

25

22

Sources: PAX 141997; Affluent Sample; 7 markets; PAX Q3 2010 to Q2 2011; All Affluent; 10 markets excluding Tokyo.

Indonesia

Malaysia

Philippines

Singapore

17

16 Source: PAX ECI Q4 2010 to Q2 2011

Thailand

Vietnam

Digital consumers with an active online profile Chart 2: Digital consumers with an active profile

Social media activities to support consumer decision-making Reading other people's comments about brands, products or services

52%

Watching an online video about a product or service you were thinking about buying

31%

Discussing / posting your own reviews about brands, products or services

Chart 3: Social media activities to support consumer decision making

Source: Nielsen Global Online Omnibus

22%

4%

4%

2%

Done in past 12 months

44%

65%

76%

Done - but not in past 12 months

Never done

Source: Nielsen Global Online Omnibus

For more information contact: Synovate Fion Cheung (Fion.Cheung@synovate.com); Nielsen, Margaret Lim (margaret.lim@nielsen.com) 28 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

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ASIAN ENERGY SPECIAl REPORT

Dr. Nobuo Tanaka, ex-IAEA Geoff Cutmore of CNBC

Asia taking the lead in clean energy

larly, Thailand, Malaysia and India are at the forefront of the biomass energy industry. According to AUM Business Creations spokesperson Per Dahlen, global revenues derived from biorenewables can grow to as much Asia is investing billions into clean energy, but with appetite for carbon as EUR 450 billion by 2020 and much will come from Southeast Asia.“South emissions falling, funding new power projects is going to get harder.

East Asia is producing 450m tons of “In the second agricultural waste and this is a great lmost half the world’s investof this investment is going to Asia, quarter of this potential for the biomass energy ment into clean energy is with China leading the way. Experts year Bloomberg predict that our region will become industry,” he said. surprisingly going into Asia, reported He also noted that 50% of the but analysts warn of serious growth the top destination for clean energy $41.7 billion in constraints ahead. In many ways, investment in no time. These are very increase of ethanol in the next five clean energy 2010 was probably the peak year for encouraging investment numbers and years will be coming from Asia. investment.” clean energy investment worldwide, they are expected to increase,” he said. “Mega plants produce ethanol at with $243 billion spent on new solar, ADB forecasts that in 2050, the region’s US$1,300/ton. Shipping ethylene wind and biomass plants, up 30 % share of the global GDP will be at 51%, will cost US$1900/ton; while on site biorefineries produce it at US$ 1400/ over 2009. But the dramatic growth or almost double that of 2010’s 27%. picture is slowing rapidly, according But of course, rapid growth would also ton. It will be difficult to compete with mega plants; however, it is possible to to Bloomberg New Energy Finance mean higher energy consumption. In do so with imports.” Mr. Dahlen also editor Michael Liebrich, who reckons Asia’s case, the region’s share of global believes that there is much potential that 2011 will see around $260-270 energy consumption is projected to for the oil palm industry in the region. billion invested in clean energy. And reach 40% by 2050. ”Oil palm biomass could become a for 2012 “the best estimate would be probably flat in dollar terms.” In Who’s taking the lead in clean energy US$30-35b industry, and more than 20% of the world’s ethylene market Asia the picture is slightly better, with investments in the region? can come from biomass.” the region having already taken over According to ADB, the adoption of Regional sales manager for Caterpilrenewable technologies is currently leadership in clean energy investments lar Asia, John Lee, shared the same spearheaded by China, India and from Europe. view, adding that in terms of power the Republic of Korea, where the Speaking at the Clean Energy generated from biomass, South East transition to the state-of-the-art wind Expo, Gil-Hong Kim, director for Asia produces roughly 100MW per systems happened within less than sustainable infrastructure division at annum. “On the biogas front, the 10 years. Solar technology, is also Asian Development Bank, said that growth is going to be a bit less, maybe expected to take off, albeit at a much clean energy investments in Asia are 10-15% growth in the market in the slower pace, and ADB sees India as a now higher than ever before. “In the next 5 years. For biomass gasification, significant player in the development second quarter of this year BloomI think the growth in that market is of this technology. berg reported $41.7 billion in clean going to be quite big. It’s going to be energy investment. A good portion Southeast Asian countries, particu-

A

ASIAN ENERGY SPECIAl REPORT double or three times that of biogas. It’s a newer market and there are newer players in there and it’s going to jump,” he said.

According to Dr. Lee, Thailand has been one of the most active countries in the industry, and Malaysia has the potential to become a force to be reckoned with. “I mean, the Renewable Energy Act is stirring up a lot of interest for Malaysia. Indonesia may be next, but I think these will be the three key countries, Thailand, Malaysia and Indonesia. Other countries will surely follow. I think Vietnam will take a little bit longer because of the government.”

But while bio-mass remains a hot sector for investment, an ill wind is blowing through Asia’s wind power industry.

China and India have seen barely flat growth in terms of annual installed capacity. Alexander Tancock, general manager of Hong Kong based consultancy firm Wind Prospect, said that the market for wind energy is “quite disappointing” with Vietnam only poised to report significant growth only because it comes from a very low base. “If you look at Asia, basically China being the dominant market in the region, they’ll probably have less installed capacity this year than in 2010. So although the wind turbine market in China is very huge, it’s actually gonna shrink in terms of new installations. Last year, they had 19GW, this year most people think that its gonna drop between 15-17GW.” The outlook for India, which is the second largest wind market in the region, is also dim, with Mr. Tancock expecting it to remain having installed capacity of around 2-3GW every year. And guess what he says to other countries in the region?

“If you look at other countries in Asia, basically not much is happening. India is still there, doing around 2-3GW every year and other markets are disappointing. Thailand, they promised a lot of things but nothing has happened. Malaysia is not doing wind. Philippines has announced feedin-tariffs, but no one exactly knows what’s going to happen. I suspect not much will happen,” he said.

“I think Asia is really very disappointing and it is basically just about China and India, but those markets are really flat. They’re not going grow in terms of annual installation, not even in the long run,” he added.

For investors who still want to tap

Focus on Asia

Source: Nuclear Energy Asia

the Asian market despite the gloomy outlook, Mr. Tancock said that they might want to consider Vietnam. “If I have to pick a country, Vietnam seems to have promise because Vietnam actually has quite a good wind speed.

Vietnam is actually the most promising country in Asia, but that is because it comes from a low base of less than 1GW. It could be an interesting market of probably a couple of 100 megawatts a year and like that, but again, it’s not huge compared to China and India,” he said.

The Fukushima question While Germany has announced it will cease all Nuclear operations and Japan shows no signs of restarting plants it closed for inspection, so far much of Asia remains committed to continuing with nuclear development. But whether this stands the political tests of time over the next few years remains the big unknown. China has already done an initial survey of plants and has decided to not give approval for the construction of new power plants. According to AREVA’s Regional Director in South-East Asia and Oceania, Selena Ng, except in Japan, the construction of nuclear power plants hasn’t been stopped after the Fukushima tragedy.

Vietnam is one country that has affirmed its plans of moving ahead with its new power program, noted Ms Ng. Indonesia, on the other hand, continues to work on feasibility studies. It

“... the construction of nuclear power plants hasn’t been stopped after the Fukushima tragedy”

also seems that like Singapore’s interest in nuclear power has not waned. Ms Ng said that Singapore has reaffirmed that it will continue its feasibility studies. She adds that this is an opportunity for the country to become a major player in the nuclear power industry in the future.

Wong Meng Meng, Chairman of the Energy Market Company, also mentioned of Singapore’s continued interest in the nuclear power industry.

He cited Prime Minister Lee saying that ‘nuclear energy is a diversification option that Singapore could not afford to dismiss’. “By and large, before the March 11 tsunami in Japan, nuclear energy was seen as a carbon-free solution to the world’s energy needs, which according to the International Energy Agency, is estimated to grow 36% by 2035,” he said.

ASIAN ENERGY SpEcIAl REpoRt the question of who will buy CDM projects in Asia considering that a lot of CDM projects are generated in the region mainly because it is supported by the European bias as they have been the bedrock of demand.

A key restriction is that projects registered post 2012 are only eligible for European Union financing if they are in a least developed country.

Most of the CDM projects in Asia, however, are located in China, India and other middle-income economies.

Gil-Hong Kim, Asian Development Bank

Michael Liebrich, Bloomberg New Energy Finance

Many environmentalists had hoped that carbon trading would also help reduce carbon outputs, but that market too shows signs of dying out as Kyoto expires and a beleagured, debt-ridden world has little time for carbon-footprinting.

Carbon Markets The International Emissions Trading Authority says that as of October this year, Asia accounts for a total of 2,815 projects or more than 75% of total clean development mechanism (CDM) projects registered globally, something that makes the carbon market ideally a viable source of funding and capital inflow for the region.

The outlook for the global carbon market however is bleak which stems from doubts on whether a 32 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

Selena Ng, AREVA

new government of a comparable scale with Kyoto Protocol will be carved out during the upcoming 17th Conference of Parties (COP) at Durban. Speaking at the Carbon Forum Asia during the SIEW, Ambassador Burhan Gafoor, chief negotiator for climate change in Singapore said: “The outlook for the global carbon market is very grim. We must acknowledge that the idea of a universal carbon market covering all the major players is still some time away. We are far from concluding a legally-binding global agreement on climate change.”

The reality is that we still have a fragmented carbon market that will grow and expand in a bottom-up manner. Added to the challenge as well are European restrictions placed beyond 2012, which pose

“Asia accounts for a total of 2,815 projects or more than 75% of total clean development mechanism (CDM) projects registered globally”

No Buyers So the biggest question with regard to Asia’s carbon market trading would be: Who will buy Asia’s CDM projects post 2012? Barclays Capital director for carbon markets and environmental products, Trevor Sikorski, said: “It will be harder to finance CDM projects placed in Asia beyond 2012 which does raise question on whether there will be additional demand for sale.

You could still see the CDM projects in Asia, but the question is: who will buy them if the European Union is not buying them? I think this is the biggest question for CDM in Asia, as well as an important factor for Asia to rethink how it is pro-acting with regional carbon trading market.”

However, he is optimistic that this financing difficulty would evolve into a new dynamic where CDM projects in the region would be largely financed by Asian countries themselves. “Part of what will happen in the coming years is, I think less and less will be financed by the European Union, and Asian countries will be financing their investments in key clean investments, particularly in mobilizing their own,” he added.

Michael Dreyer, vice-president of Koelnmess Asia Pacific, shares the same view, noting that a number of national activities have either been started or revived in the past months which aim to regulate carbon trading on national levels. “From Australia to South Korea and Taiwan, over to India, national trading schemes are said to be implemented in the forseeable future or at least being in the legislative pipeline.”

Also, China announced to set up a national trading scheme by the end of the current 5-year plan, in 2015.

GERmAN couNtRY REpoRt The Singapore office covers South East Asia and together with colleagues in other Asian countries, considers itself one team ready and willing to support customers anywhere in Asia.

Carlsson believes that there are ample growth opportunities for customers and therefore for SEB in Asia. Despite the tribulations in Europe, “German companies are stronger than ever. Our customers can ride the waves and we can provide support in times of need. We have a strong balance sheet, capital ratio and substantial liquidity reserves.

This is Asia’s century - capital flow is moving eastwards and more significant global decisions are being made by the Asian offices of European businesses.” All these factors coupled with rising Middle Class materialistic expectations and strong savBo Carlsson, SEB Singapore General Manager ing habits.

Needless to say however, regional growth is not the exclusive or sufficient criterion Skandinaviska Enskilda Banken AB (publ), Singapore Branch (SEB) resulting in business success - Carlsson is the first to admit that the bank must always continue to search for unique differentiators, the greatest of which is SEB’s view of the customer-relationship both with local subsidiaries and with its customers’ headquarters which attracts its impressive suite of German clients. t may be quintessentially Swedish, but relationships to be able to add value based “To give good business advice is absolutely Skandinaviska Enskilda Banken is a on in-depth knowledge and understandcore. It remains integral that we undermajor representative of ASEAN-based ing,” says Carlsson, framed by the bank’s stand every aspect of our customers’ busiGerman businesses. “We are one of the panoramic view of Singapore’s Marina nesses. This largest foreign banks in Germany,” says Bay Financial customer-cenSEB Singapore General Manager, Bo Carls- District.

“Our DNA is DevelOPiNg ClOse, tred approach, son, “We have been in Germany for 35 years, and business with German clients in The Asian Pres- lONg-terM relAtiONshiPs, tO together with Be ABle tO ADD vAlue BAseD our ‘flat’ organSingapore is increasing year by year. In fact ence we consider Germany a home market for SEB has ON iN-DePth kNOWleDge AND isation makes it possible for us alongside the Nordic countries,” he adds. also been in uNDerstANDiNg.” us to react Shanghai for and respond Where did it start? seven years, to our customers very quickly,” concludes Founded 155 years ago, the Stockholmhas just opened in Hong Kong, and has Carlsson. based financial house remains chaired by representative offices in Delhi and Beijing. a member of the founding Wallenberg family. The bank’s deliberate “medium” sized status works to its advantage by fuelling a necessary competitive and outwardthinking spirit.

In Singapore, the wholesale bank offers a wide range of lending and risk management products with a focus on Trade Finance, Cash Management and FX Services.

Apart from MNCs in all industries, financial institutions are becoming an increasingly important customer segment for the bank. The private bank (which is a separate bank operating under a separate licence to the wholesale bank) acts for high net worth individuals of mainly European origin investing in Asia.

Mr Ole Hamre, Head of Private Banking “Our DNA is developing close, long-term

Nordic heritage, German clientele, Asian presence

I

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 33

ANAlYSIS: ASIAN tElcoS years,” said Tan. Athaporn Arayasantiparb, Head of Research for Regional Telecoms at UOB Kay Hian, noted two recent developments in the Asian telecom market: first is the emergence of new winners such as Apple and Samsung and decline of previous incumbents like Nokia and Blackberry; and second is the rapid increase in data usage even in countries such as Thailand where the framework is less than ideal.

“Within the six countries under our coverage, Singapore and Hong Kong are the early adopters. In Hong Kong, almost all new smartphones sold are 3G, rather than 2G. In fact, the biggest concern for Hong Kong operators now seem to be building the networks quickly enough to facilitate the increasing data usage. The iPhone 4S launch in Singapore and Hong Kong were both received with almost cult-like devotion, as seen from the lines of people outside the mall eager to be the first to possess these phones,” he said.

Sir, sign me up to Singapore Business Review magazine

Data adoption to spearhead telcos growth in Asia

Analysts say smartphones will spur the next wave of growth in the Asian telcos market.

M

obile telecom operators are in a Catch-22 as data use grows faster than revenue and tipping point in decline of voice begins to kick in by 2015.

Smartphones now represent more than half of handset sales in Asian markets, driving a large increase in data traffic, and over the next two years, the greater availability of more affordable smartphones at the US$100-150 price levels should be a positive for all markets, said Tucker Grinnan, regional head of Asia Telco & Media Research at HSBC. There will be a structural shift from voice to data with acceleration in smartphone take-up including other data devices, said Jeffrey Tan, a telecommunication analyst at DMG. He adds that given the rising FCFs of telcos in the mature markets, there is an inclination towards more active management of capital.

“In South East Asia, Singapore 34 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

“The iPhone 4S launch in Singapore and Hong Kong were both received with almost cult-like devotion, as seen from the lines of people outside the mall eager to be the first to possess these phones”

spearheads in terms of the adoption of data as more than 60% of handsets sold in the market are smartphones, with non-voice revenue making up some 40% of industry mobile revenues. Thai telcos still lag in terms of data adoption due to the delay in the award of the 3G spectrum. Malaysia is playing catch up in terms of data adoption with smartphone penetration at 20%; while Indonesia has one of the lowest proportions of smartphone adoption at less than 5%.”

He added that it would change the cost dynamics for an operator which subsidises the handsets, but the greater accessibility and lower barrier to ownership would accelerate the take-up of smartphones and data.

Tan identified non-voice revenue as the key driver of growth. “Non-voice revenue will be the driver of growth with double digit CAGR. Expectations are for data to overtake voice as the key revenue driver over the next 3

smartphones to spur growth Arayasantiparb said that the increasing supply of low-cost smartphones will help to facilitate growth in data usage in Asia. “It is a misconception that only the wealthy class of Asia can afford data usage. Handset margins will continue to decline due to pressure at the lower end. However, it is not true that customers will always choose the cheapest phones. In Thailand, it is clear that the cheaper house brands are accounting for less market share of total smartphone sales and it is also interesting to observe that the phones that are always out of stock are from the expensive iPhone series.

Nevertheless, low-cost smartphones are important to industry growth, if only to prime the upwardly mobile income groups of society towards increasing data usage. Today’s teenager buying handsets from his/her parent’s budget can become tomorrow’s executives with corporate budgets and the ability to authorize those of their subordinates,” he noted.

He added that data growth is probably the only area left for potential growth in Asia. For most countries, voice usage has already peaked, and subscriber growth will be more limited than in the last 5 years. At least 60% of the population in even the least penetrated markets like Indo-

ANAlYSIS: ASIAN tElcoS nesia and China already have mobile phones. Having said that, impressive data growth is seen across Asia.

Singapore has tripled data usage to total revenues of 12% to 35% over the last five years, and while the industry should not expect miracles like that to replicate themselves elsewhere, the trend is common for all of Asia.

However, in countries such as Thailand and Malaysia, broadband Internet penetration is still low, and operators such as Digi, Axiata, True, and Jasmine are making strong efforts to increase data usage in those areas.

One important catalyst for the sector is the launch of the iPhone 4S, said Arayasantiparb. It will spur another round of data growth, but smartphone shortages are also expected to happen more quickly than in previous launches of the iPhone series, because of the flood-induced plant shutdown at Thailand’s Western Digital plant. The memory devices in smartphones and tablet PCs are actually miniature hard disk drives. The Western Digital plant is the world’s largest of its kind, and Thailand is the second largest HDD production base after China.

Country-specific catalysts include Type 3 license issuance in Thailand, although this isn’t expected to happen until 2013. The Type 3 license issuance will significantly reduce concession fees in Thailand, the last country in Asia to adopt 3G, and spur a new round of investments. Elsewhere, one can expect further profit improvements amongst Asian operators as the cost of network equipment falls in the near-term along with the euro. With the emergence of leading Chinese manufacturers such as Huawei and ZTE, it’s easy to forget that European

players, such as NSN and AlcatelLucent, still account for an important part of the market too.

For Nicole McCormick, a Senior Telecom analyst at Ovum, mobile operators are in a Catch-22 situation. “Firstly, high margin traditional voice and SMS revenue remain under pressure particularly from the rise of social networking services. On the other hand, data traffic on the network continues to outstrip growth in total revenue. This data growth, in turn, means more investment is required in spectrum and it is usually the incumbent operator in a market that has the most resources, highest market share and most expansive network rollout. The challenge for other players in the market is how to differentiate their service from that of the incumbent which usually has access to greater cash flows,” she said.

New opportunities for operators McCormick sees low-cost smartphones as a huge opportunity for operators. Operators in Asia are heavily subsidizing higher-end smartphones, which can be burdensome for some operators in some markets. Once higher-end smartphone sales have reached a ceiling, the next growth wave is cheaper smartphones which, in general, require less subsidies.

Also, higher smartphone penetration leads to increased data ARPU for operators, which in turn, can stop blended ARPUs from falling.

“Data revenue in Asia Pacific, driven by increased smartphone penetration, will continue to increase over the next five years, however, growth is slowing. This is one of the industry’s biggest challenges,” she noted.

“...the fastest growing markets are the ones where penetration is still below 70%, like India, Bangladesh and Indonesia"

McCormick added that in emerging markets, there is still room for consolidation among operators.

Indonesia and Vietnam are begging for consolidation – the smaller operators in these markets will not be able to match the larger players in terms of cash investment required over the long-term.

One of the key trends in the market, said Jayesh Easwaramony, Frost & Sullivan’s Vice President of ICT Practice in Asia Pacific, is the decline in revenue growth. The Asian telecoms market is in the midst of a mature growth phase with even developing markets like Indonesia, India and Philippines experiencing a slowdown in revenue growth.

He also noted its impact on the telco business model. “The biggest change is that the consumers’ communication behaviour is changing rapidly due to increased smartphone and social media penetration. Today, communication does not mean voice and SMS anymore. It could be a status update, tweet and so on. At the same time, the same consumers are using apps provided by device players and hence impacting the value added services of the telcos. This shift to platforms, be it social networking sites or app stores, is bigger.”

According to Easwaramony, the fastest growing markets are the ones where penetration is still below 70%, like India, Bangladesh and Indonesia.

“The increasing supply of lowcost smartphones in the market will be a game changer, and is expected to bridge the digital divide. As the smartphone becomes the next upgrade for the next billion; it will drive mobile internet growth across the region,” he said.

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 35

lEGAl bRIEfING

Tax dodgers beware: new anti-money laundering laws could ensnare you Singapore has never been a welcoming place for money laundering, so why these new laws?

A

ccording to K& L Gates partner Raja Bose, the new anti-money laundering rules are tougher in two main respects: deterrence and enforcement. The new rules will implement a tougher penalty regime for offences related to money laundering and financing of terrorist activities, and the laundering of proceeds involving tax evasion will be elevated to a criminal offence.

“The increase in severity of the consequences of money laundering generally, and specifically with regard to tax evasion, should prove to deter more would-be wrongdoers from engaging in such illegal activities in the first place. While the new rules may not be tough enough to deter all attempts at money laundering, the new rules should ensure that such illegal activities are discovered more frequently and stopped earlier on and that more of these wrongdoers are held accountable,” he said. Baker & Mckenzie legal expert Edmund Leow notes that currently, Singapore’s main anti-money laundering legislation is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act or the CDSA. so whats with tax evasion?

The problem with the laws is that while the CDSA makes it a crime to engage in the money laundering of benefits from a total of 417 predicate offences, ranging from criminal breach of trust to dealing with the property of terrorists, tax evasion is not one of the predicate offences.

In the new rule, Singapore intends to include tax offences as a predicate offence for anti-money laundering rules. “The new policies will step up the enforcement of anti-money laundering rules by doubling the manpower of the Suspicious Transaction Reporting Office of the Commercial Affairs Department and by enhancing its analytical and reporting systems to detect criminal activity and illicit funds. In addition, Singapore will consider imposing tougher penalties on persons who violate anti-money laundering rules,” said Mr. Leow.

According to Mr. Leow, In one keynote speech, the Monetary

36 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

Authority of Singapore Managing Director, Ravi Menon, described the policy change as a “preemptive move” to ensure that Singapore is aligned with international standards as the Financial Action Task Force.

Edmund Leow

Raja Bose

Does this mean more compliance issues for banks?

Yes. According to Mr. Bose, the new rules will likely result in an increase in responsibility by the financial services sector. “Under the new rules, the authorities will be increasing their activities in respect of ‘suspicious’ banking activity and other transactions and will be looking to the financial services sector to alert them of such ‘suspicious’ transactions.

This should encourage the financial services sector to be more conscious of the transactions dealt

“The new policies will step up the enforcement of anti-money laundering rules by doubling the manpower of the Suspicious Transaction Reporting Office of the Commercial Affairs Department and by enhancing its analytical and reporting systems to detect criminal activity and illicit funds.” with and report those transactions so that they can be handled appropriately by the authorities,” he said.

Mr. Bose also adds that the financial services sector will also likely see an increase in business linked to Singapore.

“The new rules should indicate to investors locally and in the international community that the wealth management industry in Singapore is continuing to improve and respond to problems as they arise with support from local authorities, and that it will sustain itself as an attractive and advantageous international financial centre,” he said.

opINIoN

Tim hamleTT Christmas: The festival of retailing?

t

he first Noel, as the old song has it, was to certain poor shepherds. The point is not covered in the ditty but this is generally supposed to have been on the first Christmas Eve. Historians now believe that this was in about 4 AD, which suggests some confusion somewhere. But there is general agreement that this event, if it happened at all, happened on December 24, or whatever they called it then.

Christmas in the air!

Over the years, the church tended to extend the preparatory period in the direction of November. When I was a kid, some serious significance was still attached to Advent, which is the name for the period enclosed by the four Sundays before Christmas. Depending on which day of the week Christmas Day fell on, Advent (because it had to include four Sundays) might actually start in the last week of November. Outside the church, Christmas did not really come into view until the middle of December, although mothers’ preparations commonly started in September with the preparation of the pudding. A Christmas pudding was supposed to benefit from three months meditation in a cool dark place.

There is now, it seems, a sort of retailers’ advent, which starts earlier every year. This year, some shopping malls started decorating about November 7, and by the middle of the month large amounts of Christmas ornamentation were clearly visible.

Festival Walk seemed to have finished everything except its giant Christmas tree, which was up but still shrouded in red sheets. New Town Plaza had everything up, though a few parts of the display were still behind screens. early tunes of Christmas?

What really shook me was hearing the first “Silent Night” of the year, on November 13 in the Mongkok East MTR station. What were they thinking of? I mean there is some excuse for making an early start on the decorations. As these get more elaborate, the construction period, I suppose, gets longer and the price more expensive. Better to get more value. But the background music just requires the changing of a tape, disc or whatever. There is no reason to start on the seasonal ditties in the middle of November -- especially for the MTR, which is not selling anything anyway.

Suggested new rule for stations: don’t start the carols before Thanksgiving.

The habit of hanging things in shopping malls seems to be gradually engulfing a lot of the year. Many malls now like to do something for Halloween. This is followed in short order

by Christmas. As soon as the Christmas things are down, it is time to start putting up the Chinese New Year ones, if the New Year is reasonably early. And we hope it is, because otherwise it may clash with Valentine’s Day, for which we would like to do something different involving hearts and flowers.

After that, there is a temptation to deck All I want for Christmas is...???

Tim hAmleTT Former Editor of Sunday Standard and Associate Professor of Journalism

the mall for Easter, generally with eggs or bunnies rather than crucified Jews. And this brings us quite close to the summer. The summer is, alas, rather a quiet season for the people who make things to hang from shop ceilings. Perhaps they should work on something new: Diwali, Buddha’s birthday, Ramadan, Dragon boats? After all, none of the existing mall-decking festivals was originally a shopping event. Nor for that matter was Mother’s Day. These things cannot be made up from scratch, but they can be transformed gradually from religious festivals to retailing opportunities.

The gift for every occasion Mind you, I do wonder how effective these things are. Most of us reluctantly accept the obligation to buy some people presents at Christmas. Chinese New Year involves mainly the distribution of red packets (which is fine by me - much easier than presents) which you can get free from your bank. Valentine’s Day is rather restricted to courting couples and no amount of store bunnies is going to get me to start buying Easter presents.

I confess to recalling with some pleasure that I was, when very small, regularly taken to see Father Christmas in Selfridges. In those days, he would take you on his knee. I suspect this is now regarded as dangerously erotic but we were innocent about such things. Anyway, Christmas is a great time for kids. Whether the rest of us are cheered or got irritated by finding our usual shopping venue decked in plastic fir trees, reindeer, snow or whatever is another matter.

I do not think we can criticise places catering mainly for children -- toys stores, fast food joints -- if they make the most of any opportunity for a little topical decoration. Schools tend to do the same thing. Come to that, so do Classical radio stations. On Radio Four, it is always some composer’s birth day, death day, or whatever. But shopping malls cater mainly to adults. Customers would like to be treated like adults.

That means we don’t want to spend half the year with stuffed animals hanging from the ceiling, however cute.

In fact it is not for us. Foreigners in Hong Kong, raised on the complete Western Christmas with Rudolph, Santa, turkey, too much booze and the whole seasonal schemozzle are no doubt ready to wave a credit card at the first jingle of the bells. But there are not enough of us. Our combined buying power would scarcely finance one four-story fir tree. Most of the locals are non-Christian, and free to regard the whole thing with the sort of tolerant amusement that the English direct at Hogmanay. Or they are serious Christians, likely to be offended by the commercialisation of the proceedings, Pagan associations of mistletoe, etc.

So I suppose the whole thing is really staged for Hong Kong’s most important retail sector: Mainlanders with money. It’s our way of reminding them that they are here, where the milk is drinkable and the over-priced goodies are still over-priced but at least genuine.

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 37

ANAlYSIS: low coSt cARRIERS

The only successful long haul budget carrier in Asia -- for now

Budget airlines headed for turbulence

Not all Asian budget airlines are the same, and while some are doing well, others have business models and routes that are still unproven.

A

t first glance, running a budget airline, or Low Cost Carrier (LCC) as industry folks like to call themselves, would seem a no-brainer. The concept works well in the US and Europe, and Asia has even more people who are escaping the poverty barrier and taking to the skies. But the recent insolvency questions raised by airlines such as Kingfisher and Jet Airways of India, not to mention losses by Singapore Airlines-related carrier Tiger Airways, show that in Asia, things really are different.

One key difference, of course, is geography. Distances in Asia are longer, and getting around the region typically involves flights of several hours in duration. This means that the major trunk routes are well serviced by traditional carriers running big planes fully packed. There is little scope for start-ups to compete.

HSBC analyst Mark Webb argues that 38 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

“LCCs now account for a 30-35% market share by capacity. They operated from secondary airports and were able to achieve 50-60% lower unit costs”

as flight distances rise, some of the cost advantages are eroded. “Second, compared with the US and EU, wealth disparities in Asia tend to be wider and a large section of air travellers tend to be based in big cities.

Therefore, traffic streams tend to be more focused on trunk routes, which we argue are neither underserved nor overpriced.

Third, unlike the US and EU which have single regional aviation markets, Asian markets are still largely regulated. These regulations often restrict the markets that LCCs can gain access to, placing limitations on network expansion. Finally, there are also fewer viable secondary airports in Asia.

This means slower turnaround times, higher airport charges and fewer avenues of cost savings for the LCCs,” noted Mr Webb.

One could be forgiven living in Asia in thinking that budget carriers are everywhere, but they are nowhere

near as dominant as they are in Europe and the US where they account for 30-35% market share, compared to just 20% in Asia. Macquarie Equities analyst Russell Shaw noted that over the past ten years, LCCs’ penetration of the Asian market has increased from just 1.1% to 17.6%.

“This is unsurprising given that the domestic LCC shares of capacity in countries such as Philippines, Malaysia and Thailand are 40-60%,” he added.

The average distance flown by a budget carrier in the US is 1,884 km compared to just 522 in the EU. No comparable figures exist for Asia, but for comparison sake, a flight from Tokyo to Singapore is 5,782 km. In North Asia, the two hot spots for LCC’s with most potential are China and Japan. HSBC’s Webb noted that Japan will see the launch of three low-cost carriers in 2012 and likely see LCC penetration levels rise from

ANAlYSIS: low coSt cARRIERS the current 9% to ~25%flights by 2016. gapore–Bangkok, Hong more“competitive importantfares rolefares inand thisand equation,” “LCCs’ penproposition waswas that that “competitive transcontinental to the coastcoast of oftwelve fromvalue value proposition transcontinental flights to west the west China currently has a solitary LCC, Kong-Bangkok, eleven from Singasaid Mr. Ogilvie. etration of the quality travel need not be mutually exclusive”.

America and longer-distance to Florida.

As fly quality air travel America and longer-distance flights to and Florida.

AsManila Spring Airlines, which flies between flights pore–Jakarta, eight to airAsian marketneed not be mutually exclusive”. a few It hasstage juststage Singapore.

Kim Eng Research analyst has increased some failures, too a secondary result, itscities. aircraft length waswas much longer a result, its aircraft length much longer those that failed were mostly hybrid got permission to fly the ShanghaiRohan Suppiah said LCCs in Finally, AsiaFinally, There are also regional from justthat 1.1% those failed were mostly hybridstart-ups that thanroute, Southwest’s.

JetBlue alsoalso flew to toreturns so far. “Some have to 17.6%” than Southwest’s.

JetBlue Beijing and clearly there is a lot haveflew mixed have fared badly, with issues such as players or low costcost subsidiaries of full service players or low subsidiaries ofsafety full service of potential in the Mainland market if been wildly successful, such as Air operations, and unsustainable international destinations in the Caribbean and international destinations in the Caribbean and airlines.

These were generally very good at offering more LCCs were allowed to establish Asia, some moderately successful.”airlines. These were generally pricing affecting their ” he very good atfortunes, offering offered more frillsfrills thanthan its fellow LCCs – free offered more its fellow LCCs – free operations. added.

According to Credit Suisse low low faresfares but decidedly poor at keeping costs low. but decidedly analyst poor atAnnuar keeping costs low.reSo there mayassigned be aassigned potential in the32- 32Customer service Aziz, AirAsia LiveTV, seating, to 34-inch seatseat LiveTV, seating, to 34-inch Mainland market for Asian LCCs, Customer service has also been a ported 22% passenger traffic growth and snacks. these services, JetBlue pitch and snacks.

With these services, JetBlue andpitch the one positive sign With is that air sticking point with some LCCs but in FY08, and 21% in FY09. Passenger travel in targeted the Asian region is growtraffic also benefited from a combinatargeted business customers. business customers.it doesn’t have to be that way, argues ing much faster than the rest of the Charles Ogilvie, Panasonic Avionics’ tion of new routes and an increase world. In 2010, air travel in the region Executive Director of China, who in capacity.

“In 2008-09, AirAsia LCCs nownow account for roughly one one third of the In Europe, Ryanair followed Southwest’s model LCCs account for roughly third of the KLIn Europe, Ryanair followed Southwest’s grew 12.9%, almost double the 6.2% said the customermodel proposition offered launched new routes including totaltotal seatseat capacity within North America and and in in Over andrecorded easyJet’s focus on operations fromfrom andclosely 6.7%closely growth in North by budget carrier does not always Dhaka, Singapore-Indonesia. capacity within North America and easyJet’s focus onaoperations America and Europe, respectively. need to equate to a lousy in-flight this period, AirAsia added the intra European markets (charts 6 and 7). 7). capacity primary airports to capture business traffic had airlines, a a budget the intra European markets (charts primary airports toaircapture business Boeing estimates Asia-Pacific experience.traffic “Many had on routes such6asand KL-Singapore and travel market growth at year as Ryanair well Ryanair as full-service, in the region KL-Bangkok,” he added. semblance of the JetBlue model. tended semblance of6.7% the per JetBlue model. tended Further, given the higher loadEven factors achieved Further, given the higher load factors achieved by over 2011-30. But that does not neces- are spending more time focusing on distribution andby ticketing to concentrate on secondary and and tertiary airports to concentrate tertiary airports sarily mean Asia is ripe foron thesecondary picking their passengers’ experience and the costs can be higher in Asia, often due LCCs, we argue theirtheir passenger market share LCCs, we argue passenger market share for more LCCs. twoturnaround most efficient ways to do that to the locals having insufficient interthatthat could provide the 25-minute could provide the 25-minute turnaround would be slightly higher than their seat capacity would be slightly higher their seat capacity In fact, HSBC analysed 34 twin efficiently are through technology netthan access or credit cards.

HSBC notes to the and and special deals onopportunity essential to schedules the schedules deals on city essential routes in Asia and concluded andspecial service.

The for a that in Asia, the proportion of online market share. market share. thatlanding onlylanding eightfees, of them lacked sufsuccessful budget carrier in China is booking is relatively lower and varies had relatively low frequency but a fees, had relatively low frequency but a ficient competition currently to be to mold the right equation of flight widely depending upon the developApproaching maturity? high number offor destinations fromprice, each Approaching maturity? high number of destinations served from each good potential routes new LCCs. served schedule, and passenger experiment of the home base. Singapore’s Consider the competition on some ence with reliability and performance.

Tiger Airways has almost of base.base. easyJet waswas more willing to operate at more easyJet more willing to operate at more After reaching the mid 20s, LCCLCC market share in97% After reaching the mid bookings 20s, market share in major routes: Eight airlines fly SinTechnology will play an increasingly made online whereas for

…… butbut market shares have market shares have grown rapidly …… grown rapidly

primary airports – accepting a higher operational primary airports – accepting a higher operational North America has has beenbeen growing at a at slower pace.

North America growing a slower pace. costcost in the of higher achievable yields in anticipation the anticipation of higher achievable yields Indeed, chartchart 6 shows thatthat the LCC share has has Indeed, 6 shows the LCC share – while operating at relatively higher frequencies – while operating at relatively higher frequencies stagnated overover the last threethree years.

However, this this stagnated the last years.

However, on individual routes to attract business traffic. on individual routes to attract business traffic. could probably be the of structural changes could probably be result the result of structural changes in the as well as some notable exitsexits in industry the industry as well as some notable A common thread that that ran ran across all these A common thread across all these (Skybus and and ATA).

TheThe biggest change has has beenbeen (Skybus ATA). biggest change successful carriers waswas theirtheir focus on costs, successful carriers focus on costs, of America West, following its merger the exit of America West, following its merger efficiency and and service quality.

They attempted to to the exit efficiency service quality.

They attempted and and integration withwith US Airways, thusthus suggesting integration US Airways, suggesting be the producers in their respective be lowest-cost the lowest-cost producers in their respective that that the surviving LCCs would havehave increased the surviving LCCs would increased segments, withwith highly efficiently run run businesses, segments, highly efficiently businesses, theirtheir individual market shares.

Philippines’ number 1 LCC LCCs taking off individual market shares. and and offered a high-quality service.

TheThe basic offered a high-quality service. basic 6. Market shareof ofLCCs LCCs in America America stagnating?

Market in stagnating?

6.share Market share of LCCs in America stagnating?

7. Growing market shareshare of LCCs inLCCs Europe Growing market share in Europe 7. Growing market ofof LCCs in Europe

Source:Source: OAG, CAPA, HSBC HSBC OAG, CAPA,

2010

2009 2010

2008 2009

2007 2008

2006 2007

2005 2006

WithinWithin Europe Europe

WithinWithin NorthNorth America America Source: Source: OAG, CAPA, HSBC

2004 2005

2010

2009 2010

2008 2009

2007 2008

2006 2007

2005 2006

2004 2005

2003 2004

2002 2003

2001 2002

2003 2004

0% 0% 2002 2003

5% 5% 0% 0% 2001

35% 31% 32% 32% 35% 29% 29% 31% 30% 30% 24% 24% 21% 18% 18% 21% 20% 20% 14% 14% 8% 8% 5% 5% 10% 10%

2001 2002

40% 40%

26% 27% 29% 28% 29% 24% 25% 25% 26% 27% 29% 28% 29% 22% 22% 24% 25% 25% 20% 20% 18% 20% 20% 18% 15% 15% 10% 10%

2001

30% 30%

Source: OAG, CAPA, HSBC

Source:Source: OAG, CAPA, HSBC HSBC OAG, CAPA,

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 39

potentially huge in Asia, development of LCCs in

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

market Further, ost Asian chart 19).

the still low air travel penetration in most Asian Within Asia Pacific markets suggests a promising outlook (chart 19).

20% 15%

12%

5%

14%

16%

18%

9%

10% 2% 1% 2%

6%

5%

2010

2009

2008

2007

2006

2005

2004

2002

2003

0%

Within Asia Pacific Source: CAPA, OAG, HSBC

Tiger not burning bright

Source: CAPA, Source: CAPA, OAG, HSBCOAG, HSBC

Low air in most countries 19.travel Low airpenetration travel penetration in mostAsian Asian countries 9.0 8.0 7.0 6.0 Singapore 5.0 Hong Kong SAR 4.0 Australia Indonesia 3.0 Philippines Brunei Darussalam 2.0 United KingdomMalay sia Spain 1.0 Thailand Greece United States France 0.0 Italy Germany Japan India China 0 10000 Trips per capita

ntries

0

the region lags behind that of the US and EU.

ANAlYSIS: low coSt cARRIERS 18. Growing market share of LCCs in Asia-Pacific

Asia-Pacific one of the fastest-growing While demandisfor low-cost air transportationair is travel potentially in Asia,Indevelopment of LCCs in markets inhuge the world.

2010, air travel in the the region lags12.9%, behind almost that of the US and region grew double the EU. 6.2% and ng air travel Growing market share of LCCs in Asia-Pacific 6.7% growth recorded in North America and 18. Growing market share of LCCs in Asia-Pacific l in the Europe, respectively. Interestingly, Asia-Pacific 6.2% and 20% 18% 16%air traffic also remains relatively resilient. In 2009, a and 14% 12% 15% in the region declined just 0.2% versus declines of a-Pacific 9% 3.9% 10% registered in both North America and Europe 9, air traffic 6% (source: ICAO). In5% its Current Market Outlook, declines of 5% 2% 2% Boeing1%estimates Asia-Pacific air travel market and Europe 0% growth at 6.7% per year over 2011-30. Further, Outlook,

2001

vely

untapped market

30000

40000

50000

60000

Singapore Hong Kong SAR Australia Brunei Darussalam United Kingdom Spain Greece United States France Italy Germany Japan

Sw itzerland

20000

30000

40000

50000

Sw itzerland

60000

70000

700002008 GDP per capita (USD)

Source: CEIC, Eurostat, IMF, HSBC

2008 GDP per Source: capitaCEIC, (USD) Eurostat, IMF, HSBC

Malaysia’s AirAsia this is under 80% and for the Philippines-based Cebu Pacific, under 50%.

In Asia, traffic commission ranges between 5-8% of an airline’s total costs. Of course it will be difficult for more LCCs to take to the skies in Asia until the ASEAN countries finally liberalise their skies, which is expected by 2015. Webb noted that a few short-haul sub-regional routes have been deregulated, like MalaysiaSingapore but there still remain a large section of potentially lucrative routes that are protected by strict regulations.

“However, as we progress towards 2015 which is the timeline set for the completion of execution of the ASEAN liberalisation framework, more such routes and markets should become accessible to the LCCs.” Macquarie’s Shaw noted that the Asian market is clearly one of the fastest-growing markets but currently remains relatively regulated.

And though Open Skies is a target that has been set for 2015 for ASEAN 40 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

“AirAsia and Cebu Pacific Air enjoy large domestic markets, dominate their key trunk routes, have a well-branded product and are the lowest cost providers in their respective networks”

countries, Shaw warned that since LCC penetration rates across parts of Asia-Pacific are already fairly high, the rate of growth off a higher base is 15 unlikely to be as explosive. in for the long haul Even as would-be aeroplane barons wait for further liberalisation, others are embarking on a potentially even riskier venture--that of long-haul budget carriers.

Asia has not had a good experience with-long haul budget carriers, with the failed Oasis out of Hong Kong which folded in 2008 a prime example. Viva Macau also folded in 2010 after its flying license was revoked for non-settlement of fuel bills. Yet Air Asia has successfully operated a long haul to the UK called Air Asia X and Singapore Airlines is planning its own long distance LCC called Scoot which should take off in July 2012. So what are the prospects for long haul LCCs? Air Asia X is perhaps the best example of how to do a long distance LCC right. Launched in 2007, it flies

non-stop to 15 medium- to long-haul destinations from its base in Kuala Lumpur.

With a unit cost of US 2.7 cents per available seat kilometre, 11% lower than AirAsia, it achieved its first year of profitability in 2009 and has remained profitable since then. In 2010, it made a net income margin of 9% and generated a return on equity of 18%.

But the real reason for its success is that it is not a stand-alone long distance LCC, but rather relies on its traffic from its existing operations to fill the long distance routes. “The combined short-haul and long-haul networks feed into each other, with passengers using the Kuala Lumpur hub to connect to a wide range of routes,” noted Webb.

Doubtless, the launch of Singapore Airlines backed Scoot, which will feed into the SIA network, will either make or break the case for long-haul LCC’s in Asia. If they succeed, expect a whole new wave of long haul budget airlines emanating out of Asia.

opINIoN

Chris reed

Airports are the face of every country brand

W

15

hat do you look for in an airport?

Speed in and out, relaxation, convenience, F&B and shopping outlets, wi-fi….butterflies, forests, cinemas, massage, oh sorry the last few are just in Singapore.

Having travelled to London, Sydney, New York, Hong Kong, Malaysia, as well as China, Vietnam, Cambodia, Indonesia, Switzerland amongst others in the last year, I can honestly say that a country brand’s airport does indeed reflect the country itself.

Singapore’s Changi Airport is far and away the easiest, most relaxing and speediest airport in the world. It’s the most efficient and most relaxing. It takes minutes to enter and more importantly, after a long haul flight, it takes less than 5 minutes from landing to going through passport control to leaving the aiport, that’s right, less than 5 minutes. That, in many ways, sums up Singapore. Efficient and completely focused on a customer experience. They know that the first impression potential influential businessperson or official or media person will have of the country will be the airport, and they ensure that it runs as smoothly as the rest of the country does.

Compare this with New York (2 hours to go through customs and leave), London (1 hour to go through customs and leave, both of who’s airport resembles a building site and about as welcoming as a prison camp. The décor at both of these is dull and grey with low ceilings and unwelcome mass of iron and tape maze like queuing systems, and Hong Kong and Sydney are the same.

Compare that with Singapore, where they speed you through on the way in and you can have enjoy the usual retail and F&B outlets, but you can also have quiet time, massage time, reflexology time, enjoy goldfish, butterflies, flowers, trees, greenery galore,

Chris reeD Regional Partnerships Director (Asia), Partnership Marketing

light, and even a cinema to relax you. On the way back to Singapore it’s even better. You will be amazed by the gigantic light, green plant filled hall like arrivals, where the ceilings are as a high as the Sistine Chapel in Italy. No grey carpet, no building works in arrivals and best of all, no queues and no maze like queuing, system just that old fashion thing called enough people to service the people coming through the door and all in a straight line and all very quickly. It’s efficient and effective and polished and it’s all over in minutes.

If Singapore can make people feel so welcome on arrivals, why can’t older brands like London, Hong Kong, Sydney, and New York do the same? Or are they too arrogant and think that people no longer have the choice of where to live and where to invest? Singapore catches everyone out in many things it does, from taxation to the way it uses the F1, but Changi Airport is one of its greatest achievements.

Changi airport: Feels like home!

% qoq seas. adj.

% y oy

1m

regional economy: indonesia

Source: UBS, Haver, CEIC

Source: UBS

Chart 21: CPI inflation and credit growth

Chart 22:

CPI inflation and credit growth 20.0

% y oy

15.0

30.0

5.0

10.0

0.0

Bank credit

The world may be going to hell in a handbasket, but Indonesia will remain unaffected Will the world slowdown affect Indonesia?

Not at all. Indonesia is almost immune from the economic goings on in the rest of the world, as its economy is almost entirely domestic. 2012 should see Indonesia continue to chug along and notch up an impressive 5.5% economic growth before stepping up a gear to 6.1% in 2013, according to estimates from UBS. Good news for the people is that inflation is already on the wane. UBS noted that “weaker local and global growth should prevent too much of a bounce in inflation but we forecast an average inflation rate of 5% in 2012 after 5.4% in 2011, with the gradual acceleration through the year supported by easy monetary policy settings and less favourable weather effects.”

Gundy Cahyadi, an economist from OCBC, remains bullish on the medium-term fundamentals of Indonesia’s economy.

“The 6.5% YoY expansion chalked in Q3 has clearly alleviated our concern in September that real GDP growth might not meet the 6.5% target for 2011. The Q3 GDP data released earlier this week indicated that the strong domestic demand story remains in place, and the 7% YoY investment (GFCF) growth is definitely an encouraging note.

This was hardly surprising given that we continue to see robust import growth data, particularly in the capital goods component, which suggest that the longer-term investment projects in Indonesia were largely isolated from the turmoil in the financial markets during the period.”

2012 saw interest rates cut. Can this continue?

Not wanting to take any chances with the economy, the Indonesian central bank has been steadily cutting interest rates over the past year. The overnight bank rate in November had dropped to just 4.6%, which is now below the inflation rate of 5.5%. This will make it difficult for the Bank of Indonesia to drop rates any lower. The central bank’s 42 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

Jan-10

Jan-08

Jan-06

Jan-04

Jan-02

-5.0 Jan-00

0.0

A stronger currency could pose problems

100

10.0

20.0

How much is the price of fish in Medan?

120

80 60

Jan-05

40.0

CPI inflation (rhs)

Source: UBS, Haver, CEIC

Sources: UBS, Haver, CEIC

recent drop in interest rates still came as a shock considering that the last cut was made as a reactive move following the global financial crisis in 2008. Cahyadi said that while recent rhetoric from BI officials had been very dovish, the 50bps rate cut in November still came as a surprise, especially considering that the last time BI delivered a 50bps rate cut was seen in reaction to the 2008 global financial crisis. “Additionally, the central bank also indicated that growth is likely to underperform the 6.5-6.7% official target for 2012, even if GDP growth is set to come in at 6.5% this year,” he said.

What’s the outlook for the Rupiah?

In a word, stronger. UBS notes that capital flows pose a risk to Indonesia’s shallow financial markets, but assuming BI continues to successfully manage the currency in line with peer economies the IDR should perform much better than in 2008 and may make some gains as capital market pressures abate in 2012. “Longer term, we expect accelerating inflation and the absence of a current account surplus in 2013 to cap nominal exchange rate appreciation,” it added.

But there are still risks ahead. Swings in global trade, capital flows and commodity prices can impact Indonesia’s financial markets even if the real economy is relatively insulated.

What about inflation?

Food inflation is expected to rise again in H1-2012, said Standard Chartered. “Headline inflation has been more modest than expected in 2010 and 2011. Given headline inflation of just 2.9% y/y in January-October 2011, we expect year-end inflation of 4%.”

It expects inflation to pick up again in 2012, as electricity tariffs are expected to rise and the government’s plan to limit consumption of subsidized fuel will raise transportation costs. Furthermore, the recent floods in Thailand may raise international rice prices, pushing up domestic food inflation.

Standard Charted noted that while inflation may continue to fall towards 3.5% y/y in Q1-2012, it is likely to rise again to 4.8% in Q2 and 5% by year-end. “Accelerating credit growth – driven by BI efforts to encourage bank lending – is also likely to be a source of inflation in 2012,” it added.

Source: UBS

month interbank rate (lhs)

Com. Bk. base lending rate (lhs)

S, Haver, CEIC

Corporate profile

Currency and official FX reserves

Specialized by industry.

Engineered for speed.

140

local currency appreciation

120

100 “Survival of the fastest” is the new law of business success. Where once 80 companies could expect to be industry leaders for an average of 50 years, now 60 it’s unlikely they’ll continue to be significant for even 25 years.

40

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

20

Foreign ex change reserv es (USD bn) (rhs) Trade w eighted ex change rate: Index (2000 = 100) (lhs) Ex change rate against USD: Index (2000 = 100) (lhs)

S, Haver, CEIC

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analysis: Hong kong banks direct lending, and indirectly via their Hong Kong customer base,” noted Fitch in a report.

There is also grave concern that Hong Kong banks will face pressure from their Chinese bank parents, with Fitch seeing signs of the increasing influence of Chinese bank parents on Hong Kong subsidiaries, which could negatively influence efficiency or even reverse progress in key areas, including risk management.”Hong Kong’s banks will cede some of their historical strengths (capital, liquidity, low risk appetite, supervision) should they lower their underwriting standards and prioritise rapid growth in the Mainland.”

HK Banks’ China lending has analysts worried Another banking storm might be brewing as HK banks continue heavy lending to troubled China, reports Krisana Gallezo.

H

ong Kong banks have long backed the Hong Kong economy, but is there danger now that they are financing a growing part of China? Yes is the answer, at least according to some analysts including Fitch Ratings, who has issued a stark warning that Hong Kong’s local banks could face a credit downgrade if they don’t rein in their lending to mainland Chinese entities. Such warnings should not be taken lightly, as it was just a few months ago that ratings agency Standard & Poor's did the unthinkable and downgraded the US government.

So what is wrong with Hong Kong banks extending their loan books to China? After all, much of the loans to China are short-term, trade-related and collaterized, which will keep them safe from near-term liquidity pressures, 44 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

“Hong Kong banks’ gross Mainland Credit Exposures (MCEs) may rise to about 35% of Hong Kong’s banking system assets next year”

reckons Fitch. But what cannot be ruled out is the sudden liquidity squeeze, which was the hallmark of the financial crisis of 2008 and which could yet happen in China, leaving Hong Kong’s banks deeply exposed. It is this threat of a sudden liquidity crunch, rather than a rising number of bad loans, that has analysts most worried. Fitch estimates that Hong Kong banks’ gross Mainland Credit Exposures (MCEs) may rise to about 35% of Hong Kong’s banking system assets next year, up from just 24% at endJune 2011 and 10% in 2008 mainly due to aggression. “Fitch has so far observed a general tendency for the Hong Kong banks to accumulate China exposures through various sources as and when opportunities arise. This includes holding minority equity stakes in Chinese financial institutions, subsidiaries’

What about the smaller banks?

Even tougher warnings were issued on the outlook for smaller Hong Kong banks. Despite some opportunities in continuing to serve their respective niches at a time when competitors are focusing on a new untested market, Fitch anticipates that their limited size works against them when acquiring new clients. “Should they prioritise growth, they may be resigned to a “follower position” – participating in larger transactions via syndications or taking credit risk via securities holdings. They will also face greater funding and margin pressure than their larger rivals, especially if credit growth needs to be financed by deposits,” noted Fitch.

In particular, Fitch believes that the evolving operating environment will pose greater challenges for the smaller, indigenous Hong Kong banking groups such as Chong Hing Bank with MCEs of 21%, Wing Hang Bank at 27%, and Dah Sing Bank at about 13%. Other bank analysts are also concerned. Barclays Capital analyst Tom Quarmby warns of an impending liquidity squeeze driven by several factors, not least of which was the huge demand for credit coming from the Mainland as a result of both tightening

by Mainland regulators and the relatively inexpensive cost of Hong Kong and US dollar loans available from the Hong Kong banks. The story seems to have unravelled largely as Barclays had expected, with rising cost of funds placing

analysis: Hong kong banks pressure on lending rates in Hong Kong and forcing many banks to cut loan growth expectations for the second half of 2011, and likely in 2012.

Operational Risks In addition to the issues raised by Fitch, and Barclays’ own concerns over tightening liquidity in Hong Kong, Mr Quarmby says that along with increased credit risk exposure to the Mainland economy and corporates, Hong Kong banks are effectively importing operational risk through off-balance sheet exposures linked to so-called ‘arbitrage lending’, where borrowers are arbitraging appreciation of their RMB deposits against Hong Kong or US dollar loans. However he also notes that in recent months, the HKMA has moved to curtail this activity.

Mr Quarmby told Hong Kong Business Magazine that Hong Kong banks have been reasonably prudent in the past, focusing on loans to their existing customers in Hong Kong for use on the Mainland. However, there is an ongoing convergence between the economies and therefore also the monetary and banking systems of China and Hong Kong, which means the HKMA will need to be increasingly vigilant with regard to risk management. “We would expect, given a sound track record, the regulator will err on the side of caution going forward."

But not all analysts think the Hong Kong banks are overextended in China. Mizuho Securities Asia analyst James Antos reckons as much as half of the China exposure

carried by Hong Kong banks is actually held by foreign-owned banks with no retail banking presence in HongKong.

“Mainlandowned banks have exposures above 20% of assets”

So just how much concentration risk is there for domestic banks in Hong Kong?

“BEA and tiny Mevas Bank have more than 30% of assets in nonbank China risk, which is a serious concentration risk. Mainlandowned banks have exposures above 20% of assets, which is high, but it seems logical that a Mainland bank will have more Mainland exposure.

The other major banks have a manageable level of exposure,” said Mr Antos.

He also ruled out a major loss on the assets of Hong Kong banks over the next year or two as the NPL ratio for the Hong Kong banking sector is only 0.61% as of June 2011, which is the lowest in Asia. “The NPL ratio for the banks’ China exposures is similarly very low. It is difficult to imagine that the NPL ratio could increase to 2% or 3% unless there is a major recession in China and globally.

This is a disaster scenario which seems unlikely to occur. Since Hong Kong’s banks are quite well capitalized, even a credit setback of this magnitude would be easily managed by most or all banks,” he said.

Fig 1 Non-bank China exposure of major Hong Kong banks National

Non-bank

HKD bn

affiliation

China exp.

Assets

%

BEA

HK

204.2

598.9

34.1%

71.6

219.8

32.6%

0.2

0.7

30.6%

Nanyang Comml Bk

China

Mevas Bk

HK

China exp.

ICBC Asia

China

68.5

248.5

27.6%

Citic Bank Intl.

China

42.6

154.6

27.5%

Wing Lung Bank

China

28.5

137.1

20.8%

Chiyu Bk

China

8.9

44.3

20.2%

BOCHK

China

278.0

1,833.8

15.2%

WHB

HK

25.6

176.7

14.5%

Dah Sing Financial

HK

18.5

153.2

12.1%

Chong Hing Bk

HK

6.2

73.6

8.5%

Fubon Bk - HK

Taiwan

5.1

61.2

8.3%

Standard Chartered Bk - HK

UK

55.7

808.6

6.9%

Public Bk HK

Malaysia

2.0

38.1

5.2%

Shanghai Comml Bk

China

6.0

122.1

4.9%

HSB

HK

80.8

973.2

8.3%

DBS - HK

Singapore

4.3

258.7

1.7%

865.4

5,903.

14.7%

2,034.0

13,505.7

15.1%

Total Banking sector (HKD bn)

Comment

At Dec-2010 At Dec-2010

Source: Mizuho Securities Asia

Barclays Capital | Hong Barclays Kong Banks Capital | Hong Kong Banks

HongFigure Kong6:system loan to deposit ratio China, HK and HKuse loans for y/y use offshore y/y gth Hong Kong Figure system 6: Hong loan to Kong deposit system ratioloan to deposit ratio Figure 7: China, HKFigure and HK7:loans China, forHK and offshore HK loans forgth use offshore y/y gth

Source: CEIC, Barclays Capital Source: CEIC, Barclays Capital

Source: CEIC, Barclays Capital

27.0 16.4

Aug-11

27.0 16.4

Aug-10

45.6

Aug-09

45.6

Aug-08 Aug-11

Aug-07 Aug-10

67

%

Aug-06 Aug-09

75

70 60 50 40 30 20 10 0 -10 -20

Aug-05 Aug-08

System LDR System LDR HK$ LDR HK$ LDR System (ex RMB deposits only) System (ex RMB deposits only)

85

Aug-04 Aug-07

40

67

%

Aug-06

40

75

70 60 50 40 30 20 10 0 -10 -20

Aug-11 Aug-05

50

85

Feb-11

50

%

Aug-09 Aug-08 Nov-09 Nov-08 Feb-10 Feb-09 May-10 May-09 Aug-10 Aug-09 Nov-10 Nov-09 Feb-11 Feb-10 May-11 May-10 Aug-11 Aug-10

60

Feb-09

60

May-09

70

Nov-08

70

Aug-08

80

Aug-04 May-11

90

%

80

Nov-10

90

China China HK total HK total HK loans for use outside HK HK loans for use outside HK

Source: CEIC, Barclays Capital Source: CEIC, Barclays Capital Source: CEIC, Barclays Capital

If we exclude the two If we largest exclude banks, the HSBC two largest and Standard banks, HSBC Chartered, and Standard which are Chartered, in a much which are in a much better liquidity position better (inliquidity terms ofposition LDR), we (in estimate terms of that LDR), system we estimate LDR is that already system close LDR to is already to SINGAPORE BUSINESS REVIEWclose | DECEMBER 2011 45 75%, the operational 75%, maximum, the operational since banks maximum, are required since to banks maintain are required a minimum to maintain liquiditya minimum liquidity ratio of 25%. ratio of 25%.

Take a peek into one of DBS’ redesigned branches in Singapore

Reinventing the bank, one branch at a time Banks in Singapore are redesigning their branches to cater to the ever-changing behavior and needs of its customers, reports Isabelle Ulanday.

A

sia’s bank branches are getting a bold new makeover as bankers fight over for fashion and convenience in the battle for hearts and wallets.

Singaporean banks are at the forefront of the changes to branch design, which is only fitting as it remains one of the most competitive markets in Asia.

DBS, Singapore’s largest bank, has converted 12 of its branches into what they believe will be a branch that better caters to young adults. One of the criticisms on DBS is that it was perceived to have long queues, so the new branch design specifically addresses this issue by offering a streamlined process to encourage customers to perform regular, straight-forward transactions at self-service banking 46 SINGAPORE BUSINESS REVIEW | DECEMBER 2011

”DBS has converted 12 of its branches to cater to young adults”

terminals and through iBanking and mBanking, thus shortening queues. Starting with just 12 remodeled branches in November 2010, DBS says its new branches encourage managers to be more entrepreneurial. Branch Managers now have more time and can assume the role of entrepreneurs who “own” their branch, including it’s Revenue and Expenses. These Branch Managers and their teams are empowered to generate business in and around their geographic vicinity through programmes that are relevant and unique for the customers who patronize their branch.

This changes everything that was traditional about the “old” bank branch, from a predominantly servicing model to one of active

engagement with the emerging affluent customers and SMEs. It generated incremental revenue for the bank, as customer marketing is now decentralized to the teams who are closest and are most knowledgeable about their customers. While this transformation is still underway, DBS has already seen marked improvements in effective targeting and sales conversions from these branches versus the same period a year ago.

New apps for smartphones DBS has also introduced locationbased applications for smartphones that allow customers to locate deals around them using DBS credit cards. The apps also feature mobile coupons that deliver exclusive

brancH banking promotions to their fingertips, saving them the hassle of clipping and carrying around printed coupons.

DBS has also partnered with PayPal on its Bancassurance “DBSTravellerShield” app which was launched in July 2011 and has seen close to 500 travel insurance policies purchased via mobile phone in October alone. DBS boasts the highest adoption rate for mobile banking in Singapore and the take-up rate of its mobile suite of applications has far exceeded expectations, with over 380,000 unique users for mBanking and over 300,000 downloads for its dining and shopping apps, DBS Indulge and DBS Shopper, respectively.

OCBC’s new online banking experience OCBC has also redesigned its online banking interface after concluding that the top three user functions were account balances, bill payment, and funds transfer.

It has streamlined links (from 81 options down to 6 banking service categories); and logically-ordered, colour-aided navigation to guide user through his task in a step-bystep manner. For online banking, customers are now able to create savings jars for different goals, allowing them to integrate savings goals with their bank accounts and enable real-time monitoring of its progress. Customers are now also able to top up telco prepaid cards and ez-link cards. Other new features include SRS contribution and the Pie Chart view of customers’ Assets & Liabilities.

New features for its internet platform include the Upcoming Bill Reminder and the Opening of CPF & SRS Account. For its mobile platform, customers are able to transfer money overseas in over 17 currencies, place time deposits; apply for balance transfer; Scann-Pay bills on Android devices and iPhone; and receive the handy Online Banking application & PIN reset features.

UOB’s ‘arty’ branches UOB, Singapore’s second largest bank, has embarked on a ‘horses for courses’ approach to branch redesign, eschewing the onesize-fits-all approach to tailor-fit

DBS Remix transforms branches from the traditional ‘old’ ones to new modernized designs

A DBS branch undergoes a makeover

DBS’ self-service banking makes it easier for the customers

branches to their environment and expected clientele. Branches that mainly cater to SME businesses have a more business design with Oriental touches, such as those in their Rochor, Nex Shopping Centre and Serangoon Garden branches UOB Rochor Branch.

Other branches which are located in areas with predominantly young families with children, such as the Nex Centre branch, have a design more appropriate for that market.

And other branches are more ‘arty’.

The Serangoon Garden Branch has paper cranes hanging from the

DBS’ new branches encourage managers to be more entrepreneurial “OCBC’s customers are now able to integrate savings goals with their bank accounts”

ceiling of its stairway, made by bank employees in partnership with the children of the Little Arts Academy.

UOB has a long association with the arts, amassing a 1,500-piece art collection over the last 30 years many of which are on display throughout the branch network. For example, winning pieces of the UOB Painting of the Year Competition in 1984, 1988 and 1995 can be found in their branches in Holland, Cecil Street and Novena, respectively.

A consistent aspect to all improvements made under the programme, which began in 2009, SINGAPORE BUSINESS REVIEW | DECEMBER 2011 47

brancH banking has been the increase in the space dedicated to customer engagement, said Wendy Teo, UOB’s Head of Group Channels. The bank has increased customer-fronting space to 80% of each branch so that bank employees can better engage customers.

Bank branches for the rich UOB has also launched a flagship Privilege Banking Reserve Centre at Marina Bay Financial Centre for its affluent customers.

These customers are individuals with investable assets of at least S$100,000 and make up 25% of the working population in Singapore,

aged between 30 and 55.

For the first time, products commonly held for the ultra high net worth segment will also be made available to the rising rich. These include products with shorter duration to ride on market trends, such as currency, index, commodity and interest ratelinked products.

UOB has also opened a Wealth Banking branch at Scotts Square, Orchard Road. Customers will be able to access trading ideas and real-time information, including stock recommendations, identification of value stocks and receive advice from their

Login Ð Uncluttered page

“UOB has increased the space dedicated to customer management.”

Scan-n-Pay Ð bill payment made easy

Login Ð Simple, clean interface

4

relationship manager on fundamental and technical analysis of investment opportunities at the centre’s Reuter Insights corner. The centre also includes a travel concierge service to help customers with their travelling needs. Butlers will also be on hand to serve coffee and tea to customers.

UOB will open two more Wealth Banking branches in the first quarter of 2012 – one in Katong, a key residential district, and the other in Tampines. The three Wealth Banking branches will allow UOB to serve 50% of the rising rich segment in the country.

22

14

It’s easier to navigate through OCBC’s new online banking interface

UOB has opened its flagship Privilege Banking Reserve Centre for its affluent customers

UOB Rochor 48 SINGAPORE BUSINESS REVIEW | OCTOBER 2011 DECEMBER 2011

The Centre also includes a travel concierge service

UOB Scotts Square

UOB Holland

Co-published feature

Infor Global Solutions: Revolutionizing business application software Infor is the third largest business application software company with operations serving more than 70,000 customers. It has revenues of about $1.8 billion and has approximately 8,000 employees. But it doesn’t stop at that.

A

ccording to David Hope, President, Asia Pacific South at Infor, the company is now going towards new directions in terms of management team, strategy and technology. In early 2011, when Charles Phillips joined as the company’s new CEO, he brought in new global leadership to Infor. “He had successfully completed the acquisition of Lawson software which is about 4 and a half months ago now.

Then he totally changed the global market model in a way that Infor is now investing heavily in technology and driving innovation,” he added.

Infor indeed managed to be a game changer in the industry by providing solutions that is tailored to a specific industry.

“So as an example, I think 60% of the world’s breweries are using Infor solution and 80 of the top 100 automotive suppliers are using Infor solutions,” said Mr. Hope The company is trying to revolutionize the way people create and use enterprise software. The end user can now approach and utilize their IT system in a different, and better way. Mr. Hope noted that Infor is trying to make it almost seamless between the way that end users at any level of organization use the technology for their personal situation. “Users can access their enterprise solutions from their desktop computers, tablet devices, and smart phones (whether it’s iPhone, Android, iPad—much like they do with Google, Facebook, and Twitter). We are enabling how software works with accessibility to all those main forms of consumer accessibility,” he added.

Infor’s newest initiative Thus, the launch of Infor10 - a new technology which features a consumer-grade user experience, complete industry-specific software applications and Infor10 ION Suite, a lightweight, middleware technology that changes the way enterprise software is managed.

ION is unique to Infor10. It connects and integrates Infor and non-Infor applications,

David Hope, President, Asia Pacific South at Infor storing information in a common format and repository. ION allows information that flows among applications, analytics and social media streams to be accessed by users from their desktops, laptops and mobile devices. Unlike conventional middleware, the lightweight ION technology is not layered on top of existing applications, but infused into them.

As a result, ION makes integrations quicker, simpler and more reliable. Mr. Hope noted that ION is not heavy and cumbersome. “It’s very easy for customers to deploy. And that is also the secret ingredient in Infor that allows us the connectivity between these consumerbased applications,” he added.

Mr. Hope differentiates Infor in that we don’t believe the one-size-fits-all system approach. “We’re very much tailored to providing solutions to specific industries,” he added. Therefore ION makes it possible to connect the rich functionality of leading ERP

“We’re very much tailored to providing solutions to specific industries”

and best-in-class solutions from Infor and affiliate Lawson Software for specific industries.

Be it aerospace and defense; automotive; chemicals; distribution; equipment service, maintenance and rental; fashion; food and beverage; general manufacturing; healthcare; high tech; hospitality; industrial equipment and machinery; or public sector.

Future plans for Infor Infor is actively providing dynamic solutions in over 164 countries. But according to Mr. Hope, Infor is still looking at developing more strategic partnerships globally with a global partnership program called the Infor Partnership Network (IPN). “Infor also has a very aggressive strategy in terms of penetrating the developing economies. So we put in significant investment into South America, China and we’re now in the new level of investing in India,” he added.

Indeed, Infor is rapidly becoming a world leader in providing business application software. But we will see more of Infor’s exciting initiatives as the company continuously revolutionizes the industry in terms of the user’s experience of accessibility and drill out in terms of industry.

SINGAPORE BUSINESS REVIEW | DECEMBER 2011 49

liFe & sTyle

Who said men can’t accessorise?

For the perfect finishing touch or an expressive accent, the cufflink is indispensible to any gentleman’s wardrobe.

Quintessentially shows you the best spots to shop in your quest for sartorial splendour.

Paul Smith

581 Orchard Road, #02-24 Hilton Hotel, Singapore 238883 Known for its uncanny ability to translate a wry British sense of humour into modern apparel and accessories of the highest quality, Paul Smith’s collection of quirky cufflinks is an extension of the brand’s well-loved signature look. Often playful, occasionally cheeky and always stylish, sporting these cufflinks inject a much needed dash of literal and figurative colour into any outfit, acting as an irreverent reminder against mediocrity.

Georg Jensen

290 Orchard Road, #01-K1 Paragon, Singapore Having acquired an unwaveringly faithful fan base over the years, Georg Jensen has grown from strength to strength in representing quality craftsmanship and timeless aesthetic design. Although more known for its jewellery and homeware, the brand has grown a steady following amongst the sartorial set for its distinctly Art Noveau influenced cufflinks which are each created to reflect the functionality and ease of cool Scandinavian style.

Alfred Dunhill

01-10 Ngee Ann City, 391 Orchard Road, Singapore – 6735 1312 Since the heady early days of British motoring, Alfred Dunhill has exemplified the glamour and adventurous spirit of the sport. Still driven by luxury design, Dunhill is today known for its association with discerning gents from Jude Law to James Bond. Motor sports fans will love the cufflinks in Motorities™ Steering Wheel (SGD 340), while anglophiles are sure to be bowled over by the quintessentially British Bulldog cufflinks (SGD 475).

Shanghai Tang

Takashimaya Shopping Centre Ngee Ann City, Unit 02 12-G, 391 Orchard Road - 6737 3537

One Bond Street

http://www.onebondstreet.com One Bond Street takes a fun look at classic UK design, from quirky Union Jacks to vintage colours celebrating the victories of WWII dogfights and 1960s race tracks. Favourites include the R.A.F. Roundel (SGD 204) and the Silverstone set, celebrating a 1967 British Grand Prix win with racing green and fly yellow livery (SGD 194).

SINGAPORE |2011 DECEMBER 50 BUSINESS || APRIL 50 HONG HONG KONG KONGBUSINESS BUSINESSREVIEW DECEMBER 2011 2011

The arbiters of modern Chinoiserie may have lost their Pedder Street flagship, but their distinctive style and creative spirit is going strong with their Mongolian Village pop-up store and exciting new designs.

Welcome in the year of the dragon with a pair of silver Chinese dragons (priced at SGD 300), or capture Hong Kong flavour with a pair of silver plated miniature dim sum baskets (SGD 140).

Recommended by QUINTESSENTIALLY, the world’s leading luxury lifestyle group with a 24-hour global concierge service.

Contact hongkongbusiness@quintessentially.com.

Cordlife Singapore is