Foreign Investment in Singapore: Economic and Socio-Political Ramifications 9789814376372

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The Institute of Southeast Asian Studies

Established as an autonomous organisation in May, 1968, the Institute of Southeast Asian Studies is a regional research centre fo{ scholars and other specialists concerned with modern Southeast Asia. The Institute's research interest is focused on the many-faceted problems of modernization and development, and political and social change ·in Southeast Asia. The Institute is governed by a twenty-four-member Board of Trustees on which are represented the University of Singapore and Nanyang University, appointees from the Government, as well as representatives from a broad range of professional and civic organizations and groups. A ten-man Executive Committee oversees day-to-day operations; it is ex officio chaired by the Director, the Institute's chief academic and administrative officer.

"Copyright suooists in this publication under the United Kingdom Copyright Act, 1911 , and the Singapore Copyright Act (Cap. 187). No person shall reprod uce a copy of this publication, or extracts therefrom, without the written permissioo of the i nstitute of Southeast Asian Studies, Singapore."

FOREIGN INVESTMENT I N SINGAPORE: Some Broader Economic and Socio-Political Ramifications

by

Lim Joo-Jock and others

FIELD REPORT SERIES NO. 13 Institute of Southeast As ian Studies Price:

S$15 . 00

Publications Review Committee

Professor Kernial S . Sandhu (Chairman} Dr . Co razon M. Siddayao (Co-ordinator ) Mrs . C . P. Chin Dr. Huynh Kim Khanh Mrs. P. Lim Pui Huen Mr. M. Rajaretnam Mrs . Christine Tan

Foreign Investm ent in Singapore: Some Broader Economic and Socio - Poli tical Ramifications is the thirteenth in the Field Report series published by the Institute of Southeast Asian Studies. Lim Joe -Jock is Research Officer at the I nstitute of Southeast Asian Studies , and has lectured in the University of Rangoon and the Univers ity of Malaya i n Singapore . Prior t o j oi n i n g the Institute, he was engaged in commercial ma rket research . His p ublications include various articles o n the region , i ncluding "Singapore: Surmounting As sessables , Encountering Intangib les" i n Sou the as t Asian Affai rs 19 76. He has co-edite d and contri buted papers to Tr e n ds i n Thail and I l (S~ngapore Un i versity Press, 1976) and to a forthcoming !SEAS publication, So u t heast Asian Perceptions of Foreign

Ai d.

Lim Yoon Li n is Research Officer at the Institute of Sou theast Asian Studies, editor of Trends in the Philippine s (S ingapore University Press, 1972 ) and author of several a rtl cl es on Ma laysi a and the Philippines . Co razon M. Siddayao , Ph . D., is an economist and Senior Research Officer at the Institute of Southeast Asian Studies. She was on the faculty of the Department of Economics , George washington University, as well as Consulting Economist at the U.S. Federal Energy Administration 's Office of Oil and Gas , the Ford Foundation's Energy Policy Project , and the World Bank's Economic Analysis and Projections Department. Her publ1cat1 o ns include l ncreas ing th e Supply o f Medical 1, r :;v'"·•. : N.:.?ds A lte rn ac.ives (American Enterprise In stitute, 1 973, co-author ) ; "Ma jo r Energy Resources" in A Time t o Choo se (Ballinger, 1974); "The Efficacy of Price Mechanisms to Reduce Domestic Oil Conswnption," in Akr on Business and Economi c Review {1 976, co-author); and Southeast Asia's

Offsh or e Pet r ole um Res ource s: Economic Conside rations Relate d t o Conflict Situations {forthcoming, 1977) .

Raja Segaran Arumugam was Research Officer at the In stitute o f Southeast Asian Studies from 1972 to 1977. He has wr itten articles on Indonesia and Burma in So u theast Asi an Affat rs and his paper in the I nstitute ' s Research Notes and Discussions series, State and Oil in Burma : An Int r o duct ory S ur vey , is f orthcoming. The responsibility for facts and opinions expressed in the work that follows rests exclusively with the v arious contributors and their interpretations d o n o t necessarily reflect the views o r policy of the Institute or its supporters.

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The Institute publishes books and papers from time to time in the following series: BOOKS/MONOGRAPHS : specialized studies on topics relating to Southeast Asia. SOUTHEAST ASIAN AFFAIRS: an annual review of significant political, economic and social developments in the region, with emphasi s on the ASEAN countries. Contents include analyses in depth of topics of regional concern and of specific issues on a country-by-country basis. FIELD REPORTS : studies embodying the results of , and based exclusively on , the Institute ' s research programme; OCCASIONAL PAPERS: professional papers issued periodically on a variety of topics of regional interest; RESEARCH NOTES AND DISCUSSIONS : contributions which represent the tentative results of ongoing research, and of discussions, printed for the purpose of stimulating further thought on specific subjects. TRENDS IN SOUTHEAST ASIA : papers and proceedings of Trends seminars held on individual Southeast Asian countries; IN'rERNATIONAL CONFERENCES: publications based on proceedings o f International Conferences sponsored by the Inst~tute itself o r in conjunction with other organizations ; CURRENT ISSUES SEMINAR : publication s growing out of the Institute's Curren~ Issues series of seminars, the objective of which is to bring together knowledgeable and interested people to discuss topics of current concern and importance to the region. SOUTHEAST ASIAN PERSPECTIVES : aimed at wider circu lat ion of Southeas t Asian thinking , these publications are original contributions in English of Southeast Asians or translations of their significant papers and monographs appearing in one of the local or national languages of the region; ORAL HISTORY PROGRAMME : publications based on the o r al memoirs o f persons who have made notable contribution to , or have first - hand information to impart on , certain aspects o f the development of Singapore and Malaysia; LIBRARY BULLETINS : papers on Southeast Asian librarianship and bibliography. 1 April 1977

Director Institute of Southeast Asian Studies

CONTENTS Page 1

INTRODUCT ION PART I:

FORE IGN INVESTMENT AND INDUSTRIALIZATI ON IN SINGAPORE : Adaptive Po licies and Res ponses in an Internationally Lim Joo - Jo ck Compe titive Situation

5

PART II :

SOME MUTUAL VIEWS AND ATTITUDES Lim Yo on Li n Raj a S ega1•an Arumug am

93 107

PART III :

SINGAPORE ' S PETROLEUM SECTOR : A Case S tud y o f t h e Co untry ' s Investment Growth Co r a zon M. Siddayao

129

THE MULTINATIONAL PETROLEUM COMPANI ES AND THEIR RETAILERS IN SINGAPORE: A Po t e ntial Conflict Situati on Lim Joo-J ock

163

SOME ASPECTS OF THE WIDER PJ LlTIC.'.:... AND SOCIAL RAMIFICATIONS OF FOREIGN Lim Joo-J ock INVESTMENT

201

PART IV :

PART V:

BIBLIOGRAPHY

237

INTRODUCTION The overall objective of this study is to attempt to review the proble m in Singapore of foreign investment and to generally focus on issues arising from foreign investment in rapidly developing countries. More specifically, one major aim is to analyse government policies towards foreign investment over the past decade or so, and to assess the extent of success of these policies and likely trends. In this context it also seeks to identify, and where possible discuss, the broader social , political and economic impact of the inflow of foreign investment. Previous studies of investment and industriali zati on in Singapore have tended to examine the topic o utside the frame of political and social situations and ramifications . The study is divided into five parts which are interlinked to make a whole, reflecting a multidisciplinary approach to the topic. The first part on foreign investment and industrializat ion in Singapore assesses the available literature on the subject and analyses the content of ministerial speeches and official statements on this topic in the context of the evaluation of governmental attitudes to foreign investment . It also examines the success of government planning and Singapore ' s adaptive res ~onses to new situations. It points not only to the factors leading t o successful programmes of investment for industrialization in countries without a previous manufacturing base but in addition draws due attention to the fact that such questions could be profitably viewed against the intern al pol i tical and social conditions and in the light of changing international situations . This macro-scale study which sets the tone and stage for the monograph as a whole is foll owed by the second part which consists of two short subsections, one based on the questionnaire approach and the other utilizing both published sources as well as data gathered from a limited selection o f personal interviews. The first subsection, based on a postal questionnaire probe, supplemented by a limited number of face-to-face interviews, aims to present the viewpoint of a sample of foreign investors on the essential features of the investment climate in Singapore which influenced these investors in

2

~~ eir f1nal choice of Singapore as a manufacturing base. hr. 3ttemot was also made to elicit the main discernible pr.:;b iems. confronting them in their present activity . In th1s sense, this brief study nevertheless usefully pr ov 1des, w1thin the constraints of a postal questionnaire survey, up-to-date material to back up, and highlight, s ome of the data presented in the first part. The second subsect1on in this part examines the problem of foreign investment from the viewpoint of the local Singaporean 1ndustrialist and organized labour. It is in this way c omplementary to the earlier portion of the part. Both these subsect1ons of Part II, taken as a whole, delineate mutu al attitudes, namely, the main out lines of the foreign 1nvestors' view of Singapore and the opinions of some selected individuals in key groups of Singaporeans to foreign investors and investment.

Part III deals w1th the ~etroleurn sector of the S1 ngapore economy. It is essent1ally a case study of the place of an important foreign-exchange-earning and ~ ~p1tal-1r.tens1ve industry in the context of the c o untry's general investment and economic growth , The dat a 1s v1ewed in the context o f the overall objectives o f the gro up study. It brings together a collection of stdtistlcs and facts abo ut Singapore 's petroleum-refining 1ndustry , traces the growth of the industry and discusses the role of gcvernment pol1cy and o ther factors affecting the gx. owth of thls key 1ndustry. Par t IV, wh1ch follows , is a micro-study, based la rge l y o n f1eldwork. I t examines the transnational petr o leum companies and their retailers operating in the S1 ngapore domestic market. It is essentially a study of the 1mage wh1ch the retailers bold of the oil compan1.es, and the1r reaction to the oil c o mpan1es' policies as well as t he 1r ~ss essrnent of the motives of the oil companies. A k1nd o r p o tent ial conflict situation is indicated, in wn1 ch anthro pol og ical as well as economic factors are 1nvolved. This situation l.S underlined by differences 1n cul tura l val ues and in the widely differing appreciations o f h -::> ·"' bus1nesses should be conducted. This k1.nd of ab ras1veness can be viewed as a part of an unavoidable !r1ct 1on encountered in the overall management of rapid e ccn o mlc growth 1n which diverse groups participate. The c o nclus1. o n, Part v, reinforces the main thrust c ! t h e arguments presented i n the earlier chapters and then d1scusses s o me of the wider polit1cal and social

3

ramifications brought about by large-scale foreign investment in Singapore. It is in this manner basically a reflective piece which cogitates over problems such as the possibility of incipient economic national ism, local attitudes to, and the influence of , transnational commercial institutions in particular and foreign investors in general. In addition, it looks into the general social and political implications of the varied and ubiquitous foreign economic and social presence in Singapore . It will seek to discuss likely governmental and corporational attitudes to the resolution of possible future conflicts, involving foreign investors and local groups . Attention is drawn also to the broader international issues involved. Lim Joo-Jock Co-ordinator

PART I IN SINGAPORE: FOREIGN INVESTMENT AND INDUSTRIALIZATION an in onses Resp Adap tive Polic ies and ion tuat Si e etitiv Comp nally Inter natio Lim Joo-J ock

Back groun d ated Singa pore , an islan d repu blic with an estim ed area trict cons a on g livin popu latio n of 2 . 26 milli ons , etres kilom e squar 588 or miles re squa total ling 227 . 1959 in ion lizat stria embar ked o n a progr amme of indu are a s ment catch r wate its even rces With out natu ral resou of its needs full are curre ntly insu ffici ent to prov ide the of ition trad a ut witho and s popu latio n and its indu strie ed as scrib e d been has what ved achie has it , manu factu ring Its stria lize. pheno mena l succe ss in its effo rt to indu the rited inhe had force work and ials entre pren eurs , offic still it which on cti tradi tion of the e n trep6 t cent re, a fun on ns retur quick ively relat retai ns to a large exte nt. The rtant impo an been s alway have ng tradi in ca9i tal emplo yed Singa pore .l part of its esse ntial ly comm e rcial outlo ok , with port ng tradi nal regio a was th us almo st comp letely servi cing on , tion addi in , t nden depe ily heav my its econo nce ~n the needs of the Briti sh impe rial armed prese ld have shou it That . East Far the and Sout heas t Asia e or so into been trans form ed so rapid ly in the last decad the topi c of been has e centr l a fairl y advan ced indu stria es . 2 studi of er numb a of ct subje the and nt much comme

1

2

for furthe r For commen ts on the natur e of chang es, and the need , see Lim change s in indige nous Singa pore busin ess enter prisesin the Indus trial ement Manag and n Chong Yah, "Chan ges i n Organ izatio , vol . S , no. 2 Secto r in Singa pore ," in Malay sian Management Review ( Augus t 1970) , pp. 26-31 .

Foreign Invest ment See, for examp le , Helen Hughe s and You Poh Seng, ; Lee Soo Ann, 1969) erra, (Canb pore and Indus trial~ za tion in Singa Poh Seng and You ; 73) 19 ourne, (Melb pore Singa in on zati Indus triali 1971) for , apore (Sing y Econom Lim Chong Yah, eds. , The Singapore of pment Develo mic Econo "The Huay, Chwee Ow Lim Chong Yah and , Huan S.H. and , 1-38 Singa pore i n the Sixtie s and Beyon d," pp.

6

The industr~alization programme in Singapore, in which foreign investment has played a vital and major role, h as generally been recognized as a success. It is worth repeating that s o me observers have e ven conceded that the p r o gress achieved has been beyond expectations . This is espe ci ally so f o r the period 1968- 7 4. Progress in late 1974 and 1975 was retarded by the effects of world recession. The progress of industrializat ion over the period 1960-75 can best be summari zed in TableT. Fo reign in vestments and fixed assets in manufacturing have shown a rapid increase over the years. The rate o f i n crease averages 40% per annum for the ten years previous t o 1974. In 1964 the figure was S$110 million, but by 1974 it had reached S$2 ,9 30 million.3 By 1973, there we re fifty multinational firms engaged in manufacturing activities in Singapore. They have figured importantly i n the industrializat ion programme, and thei r d omi nating influence is reflected in their share of e xport sales. In 1970 , these foreign multinational corpo rations , either in the form of wholly-owned foreign companies o r j o int ventures with local interests accounted for 83.5\ of Singapore total direct export sales.4 "Measu re s t o Promote Industrialization , " chap. 9; Kunio Yoshihara 1

Foro~:gn lrttJiiBtnenr

and Dom€stic Response:

A Study of Singapor>e 'e

l nJ · rr.ali aac ion (Si ngapo re, 1976); Hwang Peng Yuan, "Foreign Investment in Si ngapore" and S. Y. Chia, "Export Performance in Fo re1gn Manufac turing Firms in Singapore" in Singapore in the l rt u mat i.ono.l Economy , symposium in the University of Singapore. 1972, ed. Wong Kum Poh; E. Lim Poh Tin, ed •• MULtinational Corporations and ~he i r lmpli oations f o r Southeast Asia (Singapore , 1972) and Lee W1ls on , "Manufac turing in Singapore: An Ameri can View," paper pr~sented at Conference on Business Opport unities i n Southeast Asia, London 1972. J

Statement by Hon Su1 Sen , Finance Minister, to Parliament on the !DB Amendment Bil l , 24 March 1975.

4

See ctna Siow Yue . "Export Perfo rmance of the Manufacturing Sector and o f Fo rei&n lnvesODen t " in Singapore i n the I nternati onal Economy , ed . ~oo g Kum Poh and Maureen Tan (Singapore, 1972) , p. 45. Also Ker Sin T%e, "lndustnalizatio n and Exports of Manufactured Goods: The Singa po re Ca se" i n The Neu Economic O~r and UNCTAD IV: Thd l~plioari ons f or Si ngapore . ed. Pang Eng Fona and Chow Klt Boey (Si ngapore. 19 72) , p . 195.

Table I:

1960

DOLLARS

( a t

Total

Manufac turing

f

a c

1975

1960- 19701975 1975

Annual Growth Rate

(Sl~GAPORE )

1 9 6 8

1974

1975

1974

1973

1972

1971 NI LLl ON

SOURCE:

Singap ~·c e

: Growth of Gross Domesti c Produc t and of the l'l.nufac turing Sector

t

'

r

c

0

s

t

(~ )

)

2,12Z.3

5. 747.4

6.514.1

7.247 . 2

7,737.1

8 .o51. 2

6.8

4. 1

9.3

9. 5

29 7. 7

1.192.0

1.406 . 8

1 , 634. 3

1.698.1

1.671.3

3.9

-1.6

12.7

10. 7

Departm ent o f Statisti cs, Singapo re .

.J

8

Tables II and I II put Singapore's p o sition in terms of f o reign inv estment and overall growth rates within a regi o na l and East Asian perspective. Table II:

Po ulation and GNP er ca ita and GNP fo r Sele c te d Eas t Asian and Southeast

ita Growth Rate Countries, _ 973

Population (millions )

GNP per capi ta (S $)

GNP per capita

Country

Japan

10 8.4

9,075

9. 4

Singa pore a

2.2

4,575

7. l

Hong lad

PORT AND SHIPBUILDING EXPANSION

LOGICAL q:NTRE FOR REGIONAL OFFSHORE EXPLORATION

- >

157

Refineries are capital-int ensive and absorb a small portion of the labour market, and this portion is the relatively better-skil led. In fact, the 50% excess capacity in 1975 resulted in no lay-offs of personnel: automation requires a human resource only at key points in the production process. Constructio n of a refinery f or domestic purpose thus did not fulfil one of the objectives of import-sub stitution. But it brought in foreign capital and reduced the outflow of foreign exchange by allowing some of the value of final output to be added in Singapore. It is true that, as a result of the expans ion of refinery capacity, the crunch of the oil embargo was not as seriously felt in Singapore as elsewhere, and that the electric generation sector ' s requiremen ts (50% of total consumption ) have been fully met.lS But, to repeat, refinery expansion had basically nothing to do with an energy policy. Recent Government Involvemen t in the Oil Sector At least three aspects of the petroleum industry now i nvolve some form of participati on by the Singapore these are the refining/ma rketing aspect, Government: the petrochemi cal market, and the services/su pply phase of the industry . The most recent company to join the refinery complex is Singapore Petroleum Company 1SPC) , jointly owned by the Developmen t Bank of Singapore , Amoco Internation al Limited, Oceanic Petroleum Corporation , and c. Itoh of Japan . This company mainly serves the bulk market lexcept the Public Utility Board) . Although new in 1976 , it held 10% of the inland market, 24% of the jet fuel market, and 15-16% of the bunker fuel market.l6 Like the three other major refineries, SPC exports about 85% of its production , with the bulk ofthisgoin g to Japan. About 50% of SPC ' s o utputs are sold to a Japanese group on long-term contracts Its entered into prior to constructio n of the refinery.

and IndUstry, Supplement, February 19i6 , P· 47.

15

Singapo~e T~ade

16

Information obtained from interview with Singapo re Petroleum Company in early 1976 .

158

products are mainly i ndustrial fuel (fuel oil , i ndustrial diesel) , liquefied petr oleum gas , bunker and aviation fuel. Already mentioned above is the proposed Singapore Japanese petrochemical complex . Less well-known i s the Singapore Government's purchase of controlling interest in the Loyang o ffshore exploration supply base and its establ ishment o f another in Jurong . The Development Bank of Singapore and the EDB each acquired a o ne-third interest i n the Loyang base in 1970, as the base started to flourish , and management of the base was g iven to the Singapore Offshore Petroleum Services Company. The success of the Loyang base led to the establishment of the Jurong Marine Base , a h i ghly sophisticated service base that includes fa cil itie s for re pairing of f shore rigs . l7 The purpose of government involvement ~ n the petroleum industry ~s not immediately obvious . Such moves may be taken to suggest either of the following : (1) such moves a re leading to greater s~ ng apore control in one form or another of certain petroleum relate d economic activit~es , or ( 2 ) such moves are n ot in any way indic at~ ve of any change in the economic philosophy beh~ nd gove rnment policies . I f such actions presage government policy other than that indicated on the surface by s tatement s of officials accepted at their face value, one may ask certain questions and consider possibl e future directions . It is always hazardous to predict future events , even when all the factors influencing such events are known - wh~ch is not the case here. Nevertheless an a tte mpt is made to analyse possible (in light of trends in many develop~ng countrie.s) but not necessarily probable i mpli c ations of recen t deve l opment s. One of the questions that may be asked is whether or not the ref~neries or the service bases may be converted into public ut i lity type enterprises. This does not appear to be a rational ob jective. These two sectors do not fit the descript~on of firms that require regulat~on ~n the manner in wh~ ch publ ic utilities are regulated. The d~st~nguishi ng feature of public utility regulation is ~hat ~he pr~ces that are charged (and therefore the profits or rate of return) are regulate d by a govern ment agency . The ma~n characteri s tics of public utilities that distinguish them from ether business are that "(a) they are free from 17

See Ho Kwon Ping and Jim Matthews, op . cit. , p . 16 .

159

business competition to a substantial degree , and are often pure monopolies; (b) required to charge only reasonable rates that are not unjustly discriminatory; (c) allowed to earn but are not guaranteed a reasonable profit ; (d) obligated to provide adequate service to the entire public on demand; (e) and closely associated with the process of transportation and distribution."l8 Since the refinery sector and the supply/service bases are e x port- oriented, they cannot be insured against competition in foreign markets; and the first condition requiring public utility type regulation fails . In return for allowing the firm to earn a certain rate of return, the firm must be guaranteed a market for its product . This cannot be guaranteed by the Singapore Government for export products. All government involvement in the petroleum sector so far has been in profitable or potentially profitable activities . All of these firms have been or will be run on a strictly commercial basis, and are expected to survive on economic efficiency and positive returns on investment . The establishment of a petrochemical complex appears to be based on economically sound grounds; the objective is to diversify the sources of growth and in no way suggests a basic attempt to gain contro l of the industry. Ostensibly the companies operate like any private corporation - on a profit/loss basis. The marine bases were acquired or set up because of their profitability . SPC's prices are compe-titive , and it claims its 24% share of the aviation market was developed on the basis of competitive bids. SPC does not plan any exploration at this time because it cannot a f ford such high - risk venture - a very capitalistic type of response. Its costs would be comparable to the other private companies as far as local personnel are concerned because their salaries are said to be comparable to the rest of industry; the rationale for this position is that to pay less would invite mobility to better- paying jobs elsewhere . A seemingly better proof of its free enterprise orientation is the reason given for its not selling to PUB - the price PUB wants to pay is too low for the kind of market they would like to sell to. In fact , the refinery is designed to process low- sulfur crudes, which commands higher prices in the Japanese market.

18

See P.J. Garfield and W.F . Lovejoy , Publi c Ut ili t y Economics (Englewood-Cliffs, N. J .: Prentice-Hall, 1964) , p . 2.

160

SPC's management explained that one of the purposes of government entry into the refinery business, despite the fact that there were already three major oil companies in the market, was to provide exposure in refinery operation and management to Si ngapore nationals. At the outset SPC had to hire expatriate personnel, and at one point there were 39 such expatriates in refinery training and start-up programmes.l9 By 1975 total expatriate staff had been reduced to 8 in all functions . The long-range implications of this latter policy and of SPC ' s market shares may raise certain questions . Will there be a future requirement t o staff the refineries only with nationals? Will there be a future requirement to have all planes and ships serviced only by SPC , in the same way a proposal was made early in 1976 to turn over all ground operations at the airport (including counter , ticketing, cargo and servicing) to Singapore Airport Terminal Services , a subsidiary of Singapore Airlines? It will be recalled that SPC already supplies the bulk of the aviation fuel required by SIA. Another important objective could, of course , be in sight. It is possible that the Singapore Government , aware of the effects on corporate behaviour of oligopolistic power (which exists in the refinery sector) , has set up SPC as a yardstick of performance or as a countervailing check on the other companies. If SPC is run like an ordinary commercial enterprise, if its costs a r e comparable to the other companies, and if its prices are competitive with the other companies, then th is is one way to keep prices in check and at the same time to get an indication of the level of prof i ts of the other companies. The quest ion of eventual national i zation of the may also be raised . The training of Singaporeans in refinery management may be construed as the beginning of this trend. The shift may not necessarily be to a government-run corporation but to one of Singaporean -run corporations . In terms of allocative efficiency, nationali zation in the sense of a government take-over and management by a government body does not appear to be a sound objective for the refineries . The policy-makers are, no doubt, aware of the poor performance of government oil companies in other refiner~es

19

See Auge International,

Singapo~e

(Special Edition) , 1975 , p. 153.

161

countries. Evidence presented by the U.S. Federal Energy Administration to the U. S. Congress in 1975 showed that in every foreign country where a government oil company had been created (and where sufficient data were available) , "without exception the performance of these entities has been markedly inferior to that of competing private companies . "20 This was true notwithstanding the fact that many of these government companies had received special privileges in the form of endowments, tax exemptions , etc. The key performance factors used as criteria for evaluating efficiency were (1) net income as percentage of stockholder's equity and of sales , (2) investment per employee, and (3) volume of crude oi l production and refining. Below is a summary of the findings:

Private Companies

Government Companies

Net income as % of Sales Stockholder ' s equity

8.4 12 . 3

3. 1 3. 5

135 .0 168 .0

43.0 73 . 0

44.2 36.4

6,6 14 . 1

$'000 per employee of Yearly sales Total assets Barrels per day per employee Crude oil production Refining

The foregoing indictment of government-run corporations is made notwithstanding the present involvement of the Singapore Government in the profitable supply/service bases and its joint venture with the Japanese group in the petrochemical project . In two of these three ventures partial

20

Federal Energy Administration , Office of Oil and Gas , "An Evaluatt )n of a Federal Oil and Gas Corporation , " August 1975 (typewritten .: , py)

162

ownersh 1p belongs to the private sector . The pressure to be effic1ent and profit ·making therefore stil l remai ns. If government-run corporations in the oil industry do n ot appear to be sound, and therefore, are unlikely objectives , the q uesti o n o f Si n gapore-owned refi ner i es in the future may als o be raised. Eve n without the usual vili ficati o n of the multina tion al corpor~tinn , t he poss i bil ity ne vertheless e x ists that thes e r e f l nerles may o ne day be req uired initially to be comp letely run by Singapore nation als and, later , t o be o wn ed , I n part o r in whole , by domestic capital . The latter presumes t hat en o ugh d omes t1c c a p1t al will have been accumulated to take over the huge capital assets o f the ref i nery sector . Th1s, o f course, is n o t unl ikely , a s growth experlence elsewhere has shown . Japan , for e x ample , has l o ng reached the s tage where d o me stic capital ex ceeds l nt erna l needs and has b een seeking o utlets f o r i ts ex cess capi ta l accumul ations. And the expo rt-ori en locl g r o wth o f Singapore is in some ways, after a ll, a t epet ltl o n o f Japan ' s e x port-oriented growth s t o ry . The above 1s, of course , con j e c t ure. Ano t her sce na rio for the future c ould well be a maintenanc e of the st atus q uo in so far as poli cies affec ting dtre ct investment are concerned. A diversity in the n a tionality of the 1nv estlng compan i e s may , in fact, be o ne of t h e keys of Si n gapo re' s nat1onal security against external f o rces tn t he lon g run . 2 1 Al so, as stated in the earlier part o f t hts paper , an o pen, pragmat1 c approach and concern f or eff tci en c y ln resource utilizat ion have characterized the government' s po li ci e s . These have resulted in obviously large econo mic benefits c o this tiny island state. Based o n earlier trends, therefore, it does not appear likely that the pri va te enterprise sy stem or f oreign capital and technology would be unwelcome in the fores eeab le fut ure .

21

I wish t o acknowledge the suggestion of a co lleague for this idea .

PART IV THE MULTINATIONAL PETROLEUM COMPANIES AND THEIR RETAILERS IN SINGAPORE: A Poten tial Conf lict Situa tion

Lim Joe-Jo el