Category Archives: Economics

Singapore F&B businesses attracting private equity investments

In Straits Times on Christmas Day, a trend was observed on the Singapore’s food businesses: they are attracting a increased interest from private equity investors. Singapore’s reputation as a food paradise also helped in developing a healthy appetite for food businesses with good potential to expand abroad.

According to research company Preqin, about 75% of private equity-backed buyout deals here this year were in the restaurant sector. The following deals are of specific interest.

  1. Standard Chartered Private Equity’s (SCPE) growth capital injection of S$73 m into Crystal Jade, made after the restaurant chain was taken over by the private equity arm of Paris-based luxury group LVMH Moet Hennessy Louis Vuitton last year at US $100m.
  1. Heliconia Capital Management, owned by Temasek Holdings, took a $10 million stake in seafood restaurant chain Jumbo’s initial public offering in November. Jumbo, well-known for its chilli crab, fits in well with its investment strategy of middle class theme. Heliconia made its investments largely based on three major themes – the trend of a growing middle class in the region, urbanisation and innovation and technology.
  1. Singapore-based private equity firm Credence, paid $23 million to buy out the firm from its founder last November. Credence saw the value of a Singapore-based food business: to capitalise on the strength of the Singapore brand in order to scale Fassler’s business beyond Singapore.

Auctioned properties now at 6-year high

According to Business Times over the weekend, it was reported that there are more properties put up at auctions but much less were sold. Though there were 796 properties put on auction according to Colliers, only 33 were sold. This success rate of 4.1% is less than an average of 6% over the past 5 years. There is still a big price gap between sellers and buyers resulting in stalemates in most of the auction sales. Most of the properties that are suffering from the lull belongs to the high end private residences and high-quantum priced homes (such as landed homes above 3000sqft and condos of more than 1500 sqft).

Singapore job market weakening in the last quarter

According to local press this week, Singapore’s job market is seeing signs of weakening in the last quarter, not surprisingly owing to the low economic growth. In fact according to Manpower Ministry, the employment growth this year so far is at the lowest it has been since 2009.

However, job vacancies still outnumbered job seekers, though the ratio has moderated. While overall unemployment remained unchanged at a low 2 per cent, unemployment rates crept up for residents and citizens for the second consecutive quarter.

The Singapore economy will likely continue to face headwinds and risks pertaining to the slowdown in China, as well as the potential impact of the Fed rate hike. The Fed has just raised US interest rates this week.

Stable, sustainable property market in interest of all: Heng

IT is in the interest of all stakeholders to have a stable and sustainable property market in Singapore, Minister for Finance Heng Swee Keat told industry players at the Real Estate Developers’ Association of Singapore (Redas) anniversary dinner at Marina Bay Sands on Thursday night.

“The industry, homeowners and the government have a shared interest in ensuring a stable and sustainable property market. Indeed, the US subprime debacle and the ensuing Global Financial Crisis in 2007-08 have reminded us starkly of the perils of credit and property bubbles, and the risks of asset markets becoming de-coupled from the economy’s underlying fundamentals,” Mr Heng reminded the audience.

“The consequences have been severe in the US, as a housing market collapse quickly cascaded to the financial system and led to a recession, not just in the US, but in the rest of the global economy.”

These remarks come even as property players continue to chafe at the impact of government cooling measures on recent years. They highlight a host of issues that face developers here – from an oversupply of residential units to a ballooning unsold inventory and rising costs of construction and operations.

Thus, prices “cannot drop too deeply without affecting the quality of our products and operational obligations”, Redas president Augustine Tan said at the event.

“Having made significant progress in the standard of our built environment, it is no longer possible to look back. We have to progress.”

Citing a recent Redas survey of its members covering 14 non-landed projects launched from 2013 to 2015, he highlighted that respondents reported price reductions of up to 11 per cent with some projects having had two price cuts since 2013.

The clock is now ticking for the 3,000 units in projects from the Government Land Sales Programme of 2012 that have remained unsold to-date.

“Developers will have to sell out 100 per cent of the units in these projects by 2017 in order to qualify for the remission of the Additional Buyer’s Stamp Duty (ABSD) on the land cost,” said Mr Tan, who is also executive director, property sales and corporate affairs, at Far East Organization.

Since late 2011, developers here have had to develop any residential site they buy, and sell all the units in the new project within five years, or pay the ABSD of 10 per cent. Sites bought from Jan 12, 2013 onwards will incur a higher 15 per cent rate.

The Ministry of Finance had last month said that it did not see the need to relax this condition as “the deadlines remain relevant and reasonable”.

The Finance Minister told the gathering that Singapore had experienced swings in the property market from time to time but these have not led to volatility in the broader economy because of its prudent approach.

“The government has always taken a medium-term approach towards managing land supply, based on fundamental demographic and economic factors, and has encouraged a competitive and transparent environment to ensure a well-functioning property market,” Mr Heng said.

“When necessary, we have judiciously used targeted prudential and fiscal measures to smooth out the cycles and promote market sustainability over the medium term.”

In response to concerns over a potential oversupply of completed residential units, the government had moderated the pace of land sales for residential development. But this led to land prices staying elevated as a result and did not make it less costly for developers to replenish their land bank.

Food start ups turn to shared kitchen spaces

Home-based food businesses thinking of scaling up their operations often find themselves stuck between a rock and a hard place.

On the one hand, setting up a shop requires at least a four-figure sum that they might not have. On the other hand, producing larger amounts of food at home for sale to the public could mean running afoul of the law.

This is where kitchen co-working spaces come in.

In the last two years, at least 30 home-based businesses here have been renting licensed kitchen spaces on a shared basis to prepare food that can be sold to the public.

Rental kitchen operators The Straits Times spoke to said they have had 20 to 50 per cent more inquiries since last year, but many have run out of space. There are at least four such co-working spaces.

At Baker’s Brew Studio in Sembawang, inquiries about kitchen rentals have tripled from one to three a week since it opened in February, said co-founder Beh Huat Jin, 26.

Food entrepreneurs pay $15 to $20 per hour for access to a fully equipped commercial-scale kitchen, sometimes sharing the space with one or two others at the same time. They usually prepare baked goods that can be pre-ordered online. These include sandwiches, oat bars, cakes and muffins.

Under the Home-Based Small Scale Business Scheme, residents can use private residential premises to make small amounts of food to sell to friends and relatives.

However, operators of food-related business activities that are advertised online and require the use of commercial-grade equipment must have the food prepared in properly licensed premises, or risk a fine of up to $10,000.

Not all rental kitchens have a National Environment Agency (NEA) licence that allows food to be sold to the public. Eureka Cooking Lab in Upper Thomson, for example, rents out kitchen space for private events or cooking demonstrations only but owner Jason Lim, 40, said some “still try their luck”.

NEA received more than 200 counts of feedback on unlicensed commercial cooking and selling food without a valid licence during the first half of this year, and has taken nearly 100 enforcement actions.

Checks on licences aside, entrepreneurs are glad for spaces that allow them to try out their recipes.

Ms Ng Xiu Juan, 24, a full-time baker and a culinary school graduate, pays $600 a month for a kitchen space for 40 hours. “It’s a flexible arrangement and works out for me cost-wise because the kitchen has all the equipment I need. We also get advice on how to promote our business,” she said.

Butter and Bake, a co-working kitchen space in the Lavender area, hosted just two businesses when it started last year but has 10 now. It offers a supportive community for entrepreneurs “serious about starting their own food businesses”, said founder Felicia Lee, 29. Her clients pay $660 each to access the kitchen for 30 hours a month.

Ms Annabella Sonwelly, 35, director of Annabella Patisserie, which is run from a rented kitchen, said: “This is a model that is helpful for many young start-ups as there is nothing big that we have to commit to upfront – and we can still grow our business when we are comfortable.”

Her small home oven became inadequate for growing business

Bakery owner Corine Yeoh, 25, used to feel “slightly guilty” when customers asked her where she made the customised cakes and cupcakes that she sold online.

Her business, Corine and Cake, was initially based at home when she started last year. As her customer base grew, however, she found it increasingly difficult to accommodate their requests. “There are also too many distractions at home if I’m trying to bake,” she said.

She considered setting up shop and applying for a National Environment Agency food shop licence to comply with regulations, but found it a daunting prospect.

“There were certain rules about pest control or the layout of the kitchen space that were quite strict,” said the former magazine editor who quit her job to focus on the business full time.

She came across a kitchen co-working space this year, and rented a space from January to September. She pays $660 a month to work in the kitchen for 30 hours, which has become a solution that is much more cost-effective.

“I could make around one cake at a time at home, as I had only a small oven. But having a commercial oven means that I can bake around nine at a time,” said Ms Yeoh, who fields around eight to 10 cake orders a week.

She also got recommendations from the kitchen’s owner on where to get baking supplies, such as chocolate, milk and cream, at good prices. “Things like these are quite important when we first start out in the industry,” she said.

She decided in mid-September to set up her own retail shop in MacPherson.

This would also allow her to devote more time and space to her business. “Working in the rented space for a few months gave me the confidence to scale up in the end,” she said.

Singapore must create products instead of just adding value

Singapore must remain globally relevant or risk becoming a second- tier city, a prominent thinker and businessman said yesterday.

Banyan Tree Holdings executive chairman Ho Kwon Ping said the country must become a creator of new products and services instead of merely adding value.

Mr Ho told the Singapore Economic Policy Forum at the Conrad Centennial that the Republic has no “proprietary advantages”, noting that its success over the past 50 years has largely depended on “relative advantages” such as a strong geographical location and lower-cost labour.

However, “these advantages do not last forever”. Costs here are now on a par with or higher than costs in many developed countries, and Singapore’s geographical location does not give it as much of an edge as before, given that the rest of the region is also growing fast.

“We need to have a proprietary advantage which we actually own,” said Mr Ho.


The real, tangible, clear and present danger for us is… the possibility that we will descend to become a second-tier city.

MR HO KWON PING, executive chairman of Banyan Tree Holdings

The aviation and pharmaceutical industries are examples of how Singapore can go beyond locational and cost advantages to become globally competitive, and more can still be done to build up sectors such as clean technology and urban solutions, he added.

If Singapore does not constantly refine its competitive edge and remain a top-tier city, it risks “a gradual decline into inconsequentiality”, he noted. “The biggest challenge to Singapore is not our non- existence, it is our descent into irrelevance.”

This can happen even if Singapore remains relatively prosperous, said Mr Ho.

“The real, tangible, clear and present danger for us is not the overdramatic one of sinking into the sea, it’s the possibility that we will descend to become a second-tier city.”

He also outlined other key risks Singapore is facing, including flagging productivity coupled with rising business costs, and an uncompetitive domestic economy.

Earlier, Minister for Trade and Industry (Industry) S. Iswaran had said Singapore must shift from simply adding value to creating value in order to unlock future economic potential.

This is especially important as domestic constraints are tightening and technological trends are poised to disrupt existing business models, the minister said at the forum, which was organised by the Economic Society of Singapore.

Singapore is also facing a more challenging environment where slower growth is likely to be the norm, he added.

Other speakers also offered their views on what the future holds.

Professor Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, pointed out a few factors of vital importance to Singapore’s continued success.

The first involves navigating the “biggest geopolitical contest in human history” between the United States and China.

“The country that is the most vulnerable to US-China competition is Singapore,” he said, noting that the Republic has close economic and cultural ties with both superpowers.

But there are also opportunities to be garnered from this, such as Singapore’s involvement in the Trans-Pacific Partnership, which includes the US, as well as China’s One Belt, One Road initiative.

Prof Mahbubani also pointed to the Asean economic grouping as being of strategic importance to Singapore’s long-term survival.

“Asean is like oxygen. You’ll notice it only when it’s not there,” he said.

Property market ‘not linked to economy’

The notion that the local property market reflects the economy’s ups and downs is widely accepted, but a new study released by the Monetary Authority of Singapore (MAS) shows that the link is less clear cut.

It notes that there is effectively no correlation between business cycles and the property market here.

This is because external factors play a strong role in Singapore’s growth performance, with exports accounting for about three-quarters of total demand.

The study found that property price swings here often come after proportionally larger changes in sales volumes of new and resale homes. The standard demand-supply model of the housing market suggests that house prices will fall when demand is weak and volumes tend to be kept in check by low prices.

The possible link between property prices and the wider economy has increasingly been the subject of academic study as well as a focus of government and central bank policies, due in part to experiences from the global financial crisis, the MAS said. Its research found that Singapore’s housing cycle has a longer duration and is generally not synchronised with the overall business cycle.

This can be attributed, in part, to the occasional use of public construction to give the economy a boost during periods of weak growth, said the MAS, which released the findings alongside its biannual macroeconomic review yesterday.

During the global financial crisis, for example, the Government proceeded with contracts worth $18 billion to $20 billion.

It also brought forward $1.3 billion worth of wide-ranging construction projects, including Housing Board lift upgrading works.

The study also found that property price swings here often come after proportionally larger changes in sales volumes of new and resale homes. The standard demand-supply model of the housing market suggests that house prices will fall when demand is weak and volumes tend to be kept in check by low prices.

But price adjustments can be hindered by factors such as a mismatch of price expectations between buyers and sellers, high transaction costs and infrequent trades.

This, in turn, leads to larger changes in sales volumes relative to price movements.

Larger-than-expected volume adjustments during property market upswings or downswings likely reflect the role of developers in managing their inventories over the property cycle, the MAS noted.

Developers typically hold back on releasing new units during cyclical downswings to preserve profit margins.

Finally, the study found that despite being volume-driven, the impact of housing cycles on the domestic labour market has been limited, as Singapore’s construction sector has been able to adjust flexibly to fluctuations in the residential property sector.

Five future challenges for Singapore economy

The challenge of moving the Singapore economy up the innovation ladder, from being one that is “value-adding” to a “value-creating” one, will be a key focus of the team set up to chart the Republic’s economic direction.

Finance Minister Heng Swee Keat, who will chair The Future Economy committee, framed Singapore’s challenges through the lens of the “five futures” – of jobs, of companies, of resources, of technology and of markets.

On jobs, Mr Heng noted that “it may not be immediate but if we look at a 10-, 15-year timeframe, the nature of jobs will change”.

With 3D-printing and additive manufacturing changing how factories are being configured, Mr Heng said, “how do we build skills and redesign jobs so that workers can be at their best and that talent can be maximised?”

He was speaking to reporters after a closed-door dialogue with business leaders at the Singapore Business Federation on Wednesday (Oct 28).

A second key challenge is that the “future of companies” will be marked by the rise of disruptive business models and competition from abroad. So staying competitive means exploring “cooperative platforms” for different business clusters to cooperate with one another and maximise capabilities, said Mr Heng.

Technology undeniably presents a challenge and, while Singapore has invested heavily in education, research and development, the “future of technology” hinges on how this can be translated into innovative processes, said Mr Heng.

But not all innovations are technology-related and another challenge, the “future of resources”, looks at how to organise one’s resources like land or staff in creative and competitive ways, he added.

A fifth area, the “future of markets”, is important because if firms expand overseas, “we transcend the Singapore market, we achieve scale”, said Mr Heng.

The formation of this committee was announced by Prime Minister Lee Hsien Loong earlier this month as Singapore faces a leaner workforce, tapering growth and a weaker global economy.

Yesterday, Mr Heng also announced that Mr S. Iswaran, Minister for Trade and Industry (Industry), will be deputy chairman of the new committee and is now helping him to select other members from a shortlist. The line-up will be announced by early December.

Mr Heng said the team will measure success by the opportunities and jobs it creates for Singaporeans, since a shift to higher skills indirectly addresses productivity issues. “Higher skills, higher productivity, higher wages – that is the virtuous circle that we hope to achieve.”

This is in contrast to the hard annual productivity growth targets set out by the last economic review committee in 2010. The report and its recommendations are expected to be issued a year later.

Singapore still the best place to do business

Singapore has emerged as the most business-friendly economy in the world for the 10th year in a row.

According to a World Bank league table, Singapore’s regulatory environment is highly beneficial for entrepreneurs.

The annual “Doing Business” report released yesterday measures the ease of doing business in 189 economies based on 10 areas of business regulation, including starting a firm, getting credit and electricity, and trading across borders.

By those measures, Singapore led the pack with a score of 87.34. New Zealand was close behind on 86.79.

Entrepreneurs in Singapore need an average of 2½ days to set up a company, while in Eritrea – the economy placed lowest in the rankings – investors usually need about 84 days, according to the report.

The data also showed that it is becoming easier to do business globally. In 2003, it took an average of 51 days worldwide to start a new business. This has been more than halved to 20 days.

“An economy’s scores on Doing Business indicators are somewhat akin to a measure of concentrations of various proteins and minerals in the human blood,” said World Bank senior vice-president and chief economist Kaushik Basu.

“They may not seem important to the lay observer, but they have huge long-run implications for an economy’s health, performance and growth.”

He noted that the study has a deliberately narrow focus.

“Because the report aims to have a global coverage, the choice of indicators is partly constrained by the data that can realistically be collected in some of the least developed economies of the world,” he said.

The report also does not capture many aspects of the business environment that matter to firms, such as security, market size, macroeconomic stability and the prevalence of bribery and corruption.

Still, the best-performing nations are “not those with little regulation but those with good rules that allow efficient and transparent functioning of businesses and markets while protecting the public interest”.

Given that Singapore’s competitors are quickly catching up, OCBC economist Selena Ling said the Republic must “keep adding value and stay abreast of the competition”, despite rising business costs, tighter labour policies and slowing growth.

The World Bank study follows a separate report released last month compiled by the World Economic Forum showing that Singapore kept its position as the world’s second-most competitive economy this year.

This was the fifth year running that Singapore came in second behind Switzerland, which stayed in pole position in the annual Global Competitiveness Report.

Meeting the needs of Asia’s cities

AS more of Asia’s population move to its cities, there is growing pressure on governments to quickly develop urban infrastructure such as housing, transportation and schools to meet the needs of city dwellers.

However, as some governments may not have sufficient resources to cope with the problems that result from rapid urbanisation – such as congestion and pollution – private sector players will have to play a part in delivering the solutions required.

Experts believe that urbanisation is one megatrend of the 21st century that will have a major impact on the global economy. Asia is the world’s fastest urbanising region, with 64 per cent of its people expected to live in cities by 2050.

China’s urban population alone has risen by more than 500 million people in the past three decades. By 2030, its cities are forecast to house around a billion people.

To cope with this wave, more investment needs to be made in transportation networks to reduce reliance on private vehicles; more high-rise homes need to be built to accommodate growing populations, and utilities and public services have to be developed to meet the needs of residents. Ensuring that development of such infrastructure is both disaster-resilient and sustainable is another key challenge.

Singapore has long been held up as a model for urban development around the world, and is particularly renowned for developing high quality affordable housing as well as infrastructure that has fuelled its economic progress. For instance, the Republic’s industrial park infrastructure, airport and seaports have been recognised as being among the best in the world. By one estimate, the global urban planning market is worth US$3 trillion.

Singapore-based private sector players such as Ascendas-Singbridge and Surbana Jurong have parlayed their expertise at home into a key role helping countries in the region develop their infrastructure.

While urbanisation can fuel economic growth, experts say it also contributes to the depletion of global resources. Meanwhile, some of the effects of climate change – including rising sea levels around coastal cities and extreme weather events – will hit cities the hardest. The World Health Organization (WHO) reported that seven million people died, or one in eight of total global deaths, as a result of air pollution exposure in 2012, a large proportion residing in urban areas.