Larger implications of Singaporean slowdown
By Paul Mackintosh - 19/03/12
I was in Singapore this week, enjoying (among other things) a networking cocktail held by the Singapore Venture Capital Association in Harry’s Bar on Boat Key. But after the fun, there are a couple of reflections on the state of the region that are worth investors’ attention.
First, the cocktail was full of MBA students from the INSEAD Asia programme, headed up by Claudia Zeisberger out of the INSEAD Asia Campus. This is already a key knowledge centre for Asian private equity, and the attendees, of all races and nationalities, some of them serial entrepreneurs, are clearly brimming with appetite for the asset class and the romance of the start-up. No matter how tarnished the dream is in the West, the vision of venture success in Asia has clearly not died, and Renren, Alibaba etc. provide ample justification. Appetite for European venture may have dried up to almost nothing, but investors wanting to revisit those dotcom-era scenarios may be lucky, and astute, enough to find exactly that promise fulfilled in Asia.
But the second was thanks to a burst water main near the Amara Hotel, which led to a power cut. For the first time ever in Singapore, I was pissing by candlelight in the hotel toilet. And this is just one instance of the fraying of Singapore’s infrastructure that has been challenging the Lion City’s squeaky-clean immaculately-run reputation of late. The MRT has witnessed months of service disruptions, the latest in March for over 12 hours, with lack of contingency planning leaving commuters trapped in trains. Roads too are increasingly crowded, as Singapore’s systems struggle with a load beyond their design capacity. And this affects human as well as physical infrastructure. An influx of lower-end migrant workers is further straining the physical fabric, and local tolerance, amid a growing gap between rich and poor. Meanwhile, ST Kinetics is struggling against corruption allegations in India over contracts awarded there, just months after Singapore’s Corrupt Practices Investigation Bureau began investigating the heads of the Singapore Civil Defence Force and the Central Narcotics Bureau.
Asia’s growth model, in Singapore, in China, and India, is now facing challenges across the board. While PRC premier Wen Jiabao cuts the country’s headline growth target to 7.5% while calling urgently for reforms, India’s reform process is mired in political deadlock as the Congress-led coalition government’s authority frays. Singapore has been the model many of these countries followed as a guide to how to transition to first-world income levels. But if even Singapore can’t manage a smooth transition during this particular period of economic growth, then what hope is there for the bigger and more chaotic Asian economies? Investors banking on Asia’s growth would be wise to think about the implications.