Report from Tomorrow - Vol 44

1USD = S$1.71 (S$1 = 0.58USD)

Crowded Singapore

I read recently that this year S'pore will get it's 4,000,000th resident. There are over 700,000 foreigners in Singapore. Of these, 10-12,000 are Americans, 10,000 are British and 5,000 are Australians.

In comparison, the island of Guam us almost the same exact size as S'pore, but has only 148,000 people. So how does S'pore compare to other cities?

	City Name    Pop.      Land Area   People 
	     	     (million)    (sq km)  (per sq km) 
	Singapore      4          585      6,838 
	HongKong       6        1,095      5,480 
	Tokyo          ?            ?      5,387 
	London         7        1,579      4,433 
	Beijing       11       16,800        654 
	New York      20      137,304        145 

No wonder I think this place is so crowded. It is!


The papers are full of economic news these days. A year ago they predicted growth for S'pore of -1% to +1% - a giant drop from the normal 8-10% growth the country has experienced for over a decade. Recently the government reported that last year's growth was down to 1.2% and will not fall further. This is in line with recent reports from Korea (3-4% already) and Thailand. Other countries in SE Asia are not doing as well, but the economic attitude is palpable here. Speculation in housing has already started. Let the good times roll again!

"Whoa!", says the government, let's move cautiously. Our neighbor to the south (only a 30 minute fishing boat ride away) is hardly in good shape. Indonesia can still blow up and make a mess of the region. Malaysia's controlled economy is predicted to take three more years to recover, so all is not roses yet.

Banks Won't Make It

The most extraordinary event happened recently. Senior Minister (SM) Lee Kuan Yew spoke before parliament and gave a public slapping to the five S'pore banks. Now, understand Lee Kuan Yew has almost god-like qualities here. He made S'pore what it is today and has influence at least as much as George Washington ever could have, so when the SM speaks, people listen.

The local banks have been protected and favored here for many years - minimizing the role of foreign banks in the local economy. Now the gloves are about to come off and in 2000 many of the restrictions will be lifted. To quote SM Lee:

"Ten years ago if you had asked me, I'd say you were not doing badly in banking. Now I'm convinced we're headed down the hill. Yes, we have good bankers ... [but] the Singapore banks are [not] thriving because they are wonderful bankers. It's because I protected them... and now they have become important financial international institutions for us. But if they continue to play in that league, we'll be wiped out."

The government thinks there should be two large local banks in international banking in S'pore. One is DPOS, the bank backed by the government (all government employees belong to it). The other is up for grabs and the other four banks have to figure out if they're going to merge, stay local or fail... or so the theory goes.

UOB is now the third largest (down one notch because of a merger) and with an equity of $3.2B USD is tiny (164th) in the world. Bank of America ($45B USD) and Citigroup ($40B USD) lead the list. Even an unlikely merger of all the rest of the S'pore banks would just sneak S'pore into the top 50.

The view from inside UOB is that the foreign banks are not interested in establishing branches on this tiny island, but rather they want access to the business here. Future growth will not come from more ATMs or branches, but from expansion elsewhere in Asia and from electronic commerce.

At UOB this means they must somehow figure out how to approve loans in less than the current 90 days. It means they must somehow figure out how to update all their computer systems electronically - all over the world. Today some systems are updated by a gang of motorcycles (motorcycle net - cheap and fast).

To the banks these rules were not really a surprise, but the public nature of it was unique. There is no panic, but the cards are on the table and major change for all the banks must come. The next few years will be exciting times for a pretty dull industry.