Business Groups in Singapore

Lai Si Tsui-Auch Nanyang Business School

Nanyang Technological University Singapore 639798

Phone: +65-6790-6132 Email:alstsui@ntu.edu.sg

Toru Yoshikawa

DeGroote School of Business McMaster University

1280 Main Street West Hamilton, ON L8S 4M4 Canada Phone: 905-525-9140 Ext.20090

Fax: 905-521-8995 Email: yoshikat@mcmaster.ca

November 1, 2007

Like many other economies, the Singaporean economy is dominated by business groups.

Similar to a number of other East and Southeast Asian economies, the family-controlled

business groups control a high stake of the economy in Singapore. However, unlike in many

others, the Singaporean economy also has a predominance of the government-linked

corporations. Their creation and development reflects Singapore government’s active role in

the economy. These corporations are unusual hybrids of state and private enterprises. They

compete with private firms, including multinational corporations, and sometimes with each

other.

The Asian economic crisis of 1997 caused an upheaval in Singaporean business

practices. The government quickly restructured the financial sector and strengthened

corporate laws and accounting practices. It steered both government-linked corporations and

private sector banks to divest their non-core assets and professionalize their governance. The

government also prompted them to diversify their businesses beyond Asia. Ten years after

the Crisis, it is timely to take stock of the development and change of the business groups and

assess their competitive capabilities.

This chapter consists of five parts. In Part I, we describe the characteristics of the

largest business groups. Part II outlines the political and economic contexts of Singapore.

Part III summarizes the emergence and growth of the business groups as well as their change

in the historical contexts of Singapore and the region. We analyze the extent of the changes in

these groups after the Crisis here. We examine the competitive capabilities of these groups in

Part IV.

BUSINESS GROUPS IN SINGAPORE: PROFILES AND CHARACTERISTICS

We discuss the business groups at two levels – firm-based group level and mega-

group level. Table 1 shows the firm-based group level, displaying the largest 30 public-listed

firms arranged in descending order according to the total assets of the groups. Each of the

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firms has a group of subsidiaries and associated companies which are linked by cross-

ownership and interlocking directorates. Associated companies are entities in which the

group has between 20 percent and 50 percent of the voting rights, and over which the group

has significant influence, but does not control these companies’ financial and operating policy

decisions. A subsidiary is a company in which the group, directly or indirectly, holds more

than half of the issued share capital, or controls more than half of the voting power, or

controls the composition of the board of directors. Out of the 30 business groups, the top

three are banking groups. The market capitalization of the top largest 10 firms constitutes

58.58 percent of the total market capitalization of the Singapore Exchange (SGX) in 2006.

Out of the 30 groups, there are altogether 21 Singaporean groups and nine Hong Kong

business groups (the latter reflects the importance of foreign investments especially from

Hong Kong in Singapore). Out of the 21 domestic groups, nine are government-linked

corporations and 12 are family-controlled groups, with 11 out of the 12 family-controlled

groups are controlled by ethnic Chinese families. Among the nine government-linked

corporations, SembCorp Logistics Limited was sold to Australia’s Toll Holdings in 2006 and

is no longer a listed company. We therefore decide to analyze the 20 largest Singaporean

firms (and their groups) that are still listed in SGX as of 2006.

Figure 1 illustrates the mega-group level. All of the government-linked corporations

and their groups belong to the stable of the Temasek Holdings Limited, the largest

government holding company. According to the Singapore Ministry of Trade and Industry's

Statistics Department (2001), the government-linked corporations are entities in which a

holding company wholly owned by the Singaporean government (through the Ministry of

Finance, Inc. ) has an equity interest of 20 percent or more. Temasek Holdings, a private

limited company which is not publicly listed, is the largest shareholder of many government-

linked corporations. It does not conduct trade or business but instead holds investments, thus

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deriving income from dividends, interest, and rentals. Its sole shareholder, the Ministry of

Finance, Inc, can veto its decisions. Temasek Holdings owns more than 200 government-

linked corporations that cover a wide spectrum of industries including transportation and

logistics, ship repair and engineering, power and gas, telecommunications, media, financial

services, manufacturing and properties1. Temasek Holdings alone accounts for one-third of

stock market capitalization of SGX in 2006 (Goldstein et al. forthcoming).

The 12 family-controlled groups ultimately belong to five mega groups. Like its

counterparts elsewhere in the region, each group consists of independent firms that are linked

to a core company, which often pursues unrelated diversification rather than related

diversification and vertical integration, and resembles a web-structure rather than a unitary

organization. The organizational structure of a family-controlled mega group is characterized

by cross-ownership and interlocking directorate.

Table 2 summarizes the identified groups’ principal activities and degree of

diversification. The government-linked groups compete directly with private business groups

in all activities except food and beverage. They apparently monopolize activities in

telecommunications and post and also dominate activities in transportation and engineering.

Among the government-linked groups engage, all except NOL engaged in three or more

activities, with Keppel Corp. being the most diversified group. Among the family-controlled

business groups, all except Guocoland, engage in three or more activities, with AF&B being

the most diversified group.

Several business groups have made it to international ranking. For example, five

firms were on the Global 1,000 Listings 2004. They include SingTel (ranked 208), DBS

(ranked 444), UOB (ranked 456), OCBC (ranked 599), and SIA (ranked 740). SIA, in

particular, has been the “only Asian company outside of Japan to make Fortune’s 50-company

‘All-Star’ list” from 2002 to 2004 (Tsui-Auch 2005a). In IndustryWeek 1000 which ranks

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manufacturing companies around the globe, SPC, Keppel Corp., and F&N made it to the list

in 2005.

THE SINGAPORE CONTEXT

Developmental State-led Economic Development till 1997

Prior to the self-government of Singapore in 1959, the ethnic Chinese business

community had become an important economic and political force. However, the government

attempted to forge a multi-ethnic and multi-cultural society after 1959, de-emphasizing the

“Chineseness” of Singapore in response to the “internal ethnic imperatives as well as the

regional geographical compulsions” (Vasil 1995: 34). The Western-educated ruling elites

were wary of the ethnic business community, regarding the Chinese traders as rentiers who

did not engage in real production (Low 2001a). Due to this distrust, the lack of indigenous

capital for industrial development, and the small domestic economy, the government sought

to rely on foreign capital for economic development and was not interested in assisting

Chinese businesses in industrialization.

Following the separation of Singapore from Malaysia in 1963, the government

adopted a “two-legged” policy that relied on multinational corporations and government-

linked corporations for industrialization (Rodan 1989). On the one hand, it used tax incentives

to entice multinational corporations to establish manufacturing operations and hire local

personnel. On the other, having been inspired by the Japanese horizontal corporate groups and

Korean chaebols, the government created large government-linked corporate groups and

statutory boards both for national security objectives and to spearhead development in other

sectors such as finance, air travel, and telecommunications. The state has continued to stage

mergers and acquisitions among government-linked corporations to form “national

champions” to compete in the global economy (Yeung 2000). In early 1997 before the Asian

currency crisis, for example, NOL, the national shipping line, obtained S$824 million fund

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from Temasek Holdings and Government of Singapore Investment Corporation, both major

investment arms of the state, to support its acquisition of American President Lines (USA),

which turned out to be the largest foreign acquisition by the Singaporean firm. The

acquisition was also waived by SGX to obtain shareholders’ approval.

Although the state was generally not attentive to the interests of ethnic Chinese firms,

it did pay some heed to the family-controlled banks because these enterprises facilitated the

import/export trade and their owners had close working and personal relationships with

political leaders (Hamilton-Hart 2000, Low 2001a). Several former and current ministers and

top civil servants in fact have served as chairmen and directors in local banks (Loh, Goh, and

Tan 2000, Yeung 2003a). The local banks were protected by the Monetary Authority of

Singapore (MAS), as no new licenses for full and restricted banks had been granted since

1970 and 1983 respectively (Yeung 2003b).

While the Singaporean state has consistently used inward FDI as a key policy

instrument to develop its economy, its policy towards outward FDI has changed over time.

Till the late 1970s, it encouraged the relocation of labour-intensive production to nearby

lower-wage countries that benefited from quota-free entry into major Western markets under

the Multi-Fibre Agreement. Since the 1980s, the state identified outward FDI and the

development of offshore opportunities as a long-term solution to the nation’s small domestic

economy. Hence, it devised a regionalisation strategy to develop industrial estates in

Indonesia, Vietnam, China and India, and steered the regional expansion especially through

the government-linked corporations (Pereira 2005).

Re-regulation by the Singaporean State after 1997

Singapore survived the Asian currency crisis in remarkably good shape. However, the

business groups were negatively affected by the devastated property sector, economic

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slowdown, and the political and economic changes in the South-East Asian countries, as many

of them were involved in webs of regional business networks.

The crisis activated the institutional capacities of the developmental state to re-

regulate the economy (Yeung 2000). It urged domestic firms to undertake global rather than

regional expansion strategies, thus moving beyond the crisis-ridden Southeast Asian region to

the US, Europe, and Middle East for overseas investment (Yeung 2003a). In addition, it

announced the first corporate governance code in 2001 and offered the revised version in

2005, which recommended, among others, an inclusion of independent directors for at least

one-third of the board and the separation of the roles of Chairperson and CEO.

With respect to the government-linked corporations, the state continued to exert

pressure on domestic firms to restructure. On the one hand, it encouraged more mergers and

acquisitions to form “national champions” in order to strength their organizational capabilities

and competitive advantages (Yeung 2000). On the other hand, it attempted to divest the non-

core assets of government-linked groups in light of the debacles of the Japanese horizontal

corporate groups and Korean chaebol, and the need to raise funds for further foreign

acquisitions and create new investment opportunities for the domestic private sector (Low

2001b, US Embassy of Singapore 2001).

The economic restructuring policy was sector-specific. In the liberalization program

for the banking sector in 1999, the government removed the 40% foreign shareholding limit

for local banks to allow foreign banks to compete freely with local banks (Low 2001a) and

announced plans to issue six full bank licenses to foreign banks by 2001. The long-term

impact of the liberalization was to foster mergers and acquisitions, a consolidation process to

achieve economies of scale for the survival and growth of the sector. Third, to reduce the risk

of a bubble economy built on speculation and to avoid a bank-induced crisis, MAS began a

close monitoring of the banks’ performance, and demanded that banks divest non-financial

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activities by July 17 2004, although it eventually postponed the deadline to three years

thereafter. To discourage controlling families’ rule over local banks, the MAS imposed the

Banking CG Regulations in 2005, which are more stringent than the CG codes.

BUSINESS GROUPS: EMERGENCE, GROWTH AND CHANGE

Government-Linked Groups

Emergence and Growth prior to 1997

Temasek Holdings was founded in 1974 to manage the state’s investments in government-

linked corporations. For sectoral or national security reasons, the Ministry of Finance holds

special shares in Temasek Holdings’ subsidiaries, including SIA and SingTel. In these first-

tier subsidiaries, Temasek Holdings not only proposed broad strategies but appointed former

politicians, civil servants, and high-ranking military officials to positions of chairmen,

directors, and senior management (Low 2001b). For example, the DBS was perceived as “an

institution run along civil service lines” before the Asian currency crisis (Business Times

Singapore April 1, 2005). Nevertheless, these appointed managers and directors have been

appraised and compensated based on the standards of the private sector organizations. The

state’s strategy to entice multinational corporations led to the presence of a critical mass of

professionally managed corporations that enhanced organizational imitation of the managerial

enterprise, including the professionalization of management.

In line with the economic policy of the state for regional diversification, the Temasek

Holdings and the Keppel Group took advantage of the incentives offered by various state

agencies to spearhead the process of penetrating the Southeast Asian markets and the newly

opened China market in the early 1980s. (Pereira 2005). What is particularly ambitious was

that Keppel led a consortium of 19 Singaporean firms to establish a joint venture with the

local government to develop the Suzhou industrial park in 1994. However, the high level of

government involvement (through equity ownership and policy-making, involving 20

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statutory boards) seems to have hampered the development. In contrast, the Wuxi-Singapore

Industrial Park, which was established in the same period of time and which involved a low

level of government involvement, succeeded as a commercial venture (Yeung 2000).

The government-linked corporations’ contribution to economic development has been

a subject of debate. They have certainly catalyzed Singapore’s economic success and created

employment. Temasek-affiliated firms have enjoyed some of the best credit ratings in Asia

due to their strong cash-flow generated from their dominance in the local market and

conservative financial policies (Goldstein et al. forthcoming). However, critics have asserted

that (1) these corporations tend to be risk-averse; (2) they receive special privileges because

of their links to the government; (3) they use capital less efficiently than private firms do; (4)

they have crowded out private investment and usurped entrepreneurial activity; and (5) their

unrelated diversification makes them “jacks of all trades, but masters of none" (US Embassy

of Singapore 2001, Worthington 2003). For example, Keppel Corp. has grown from a modest

establishment of Keppel Shipyard Pte. Ltd. in 1968 into one of the most widely diversified

industrial conglomerates in Singapore which included nine public-listed companies and over

140 active subsidiaries by the early 1990s (Dicken and Yeung 1999). The government began

to encourage the highly diversified groups to divest their non-core holdings only after it

became clear that they provided less potential long-term shareholder value than did the less

diversified groups.

Divestment, Merger and International Diversification

In the Temasek Charter (2002), the government announced that it would divest its

holdings in government-linked corporations if these businesses were "no longer strategic to

Singapore or when viable market alternatives or regulatory frameworks are in place." Table 3

shows that while four out of the seven government-linked groups (which report the data of

their subsidiaries’ activities in both 1997 and 2006) reduced the proportion of non-core

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activities, three groups increased its proportion of such activities. Further, some divestments

appear to be internal shuffling among the government-linked groups. For instance, the DBS

group sold its stake in equity investments and some properties, notably, the DBS Land.

However, the DBS Land was acquired by Pidemco, a subsidiary of the Singapore

Technologies group, another government-owned holding company, and has since been

renamed as Capital Land (US Embassy of Singapore 2001).

In line with the government’s policy, the government-linked groups prompted the pace

of mergers and acquisitions. For example, the DBS and Post Office of Singapore Bank (POSB)

announced a merger in 1998. Being able to tap into deposit-rich POSB, the DBS aimed to

become a regional bank with a global presence. The acquisitions that the DBS subsequently

made in Indonesia, Thailand, and Hong Kong were seen as the state’s wish to create a HSBC

(Hong Long-based global player) in Singapore (Yeung 2003b).

Temasek Holdings has aimed to help develop its first-tier subsidiaries such as DBS,

SIA, SingTel, and NOL into leading international businesses. The Temasek group’s 2004

report, the first ever, revealed that it had spent S$3.3 billion on acquisitions in 35 countries

over the previous two years. Out of the seven groups which disclose the information on the

locations of their subsidiaries, five increased its penetration beyond Asia. In particular, three

of them (NOL, SingTel, and SPC) had a majority of the subsidiaries located outside Asia as of

2006 (see Table 4).

In some cases, however, acquisitions were proved costly, reflecting the limited

knowledge of new markets among the managers in the government-linked groups. Under

pressure for rapid acquisitions, some government-linked corporations have purchased foreign

assets at a considerable premium, for example in the case of SingTel’s acquisitions of Optus,

Australia’s second largest telecom operator. Air New Zealand, in which SIA bought a 25%

stake in order to penetrate the Australian market via Ansett, its Australian subsidiary is

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another example. Ansett went bankrupt in 2001, rendering Temasek Holdings to write off the

investment (Goldstein et al. forthcoming).

At the worst, Temasek Holdings and its government-linked corporations’ acquisitions

have drawn resistance from various countries due to its ownership structure. For instance,

SingTel’s failure to acquire Cable & Wireless of Hong Kong Telecom was attributed

primarily to China’s reluctance to permit a Singaporean entity to control its telecom assets

(see Jayasankaran 2001, Mauzy and Milne 2002), given the ownership and management links

between SingTel, the government, and the political (Lee) family in Singapore (Yeung 2003).

In particular, Temasek Holdings’s purchase of a controlling stake in Thailand’s Shin

Corp. which was owned by the family of the country’s then Prime Minister, provoked a deep

political crisis that subsequently gave rise to the military coup of September 2006. That

Thailand’s strategic industry was sold to a firm that was wholly owned by a foreign

government fumed the opposition. The events that unfolded after the coup led to many

setbacks for Temasek’s presence in Thailand. The Shin’s share price fell significantly,

reportedly resulting in paper losses for Temasek of almost US$680m as of November 2006

(Arnold 2006). Further, Temasek’s 2007 financial report shows a 31% fall in net profit that is

“due partly to the ‘impairment charge’ to reduce its investment value in Shin Corp”

(Goldstein et al. forthcoming). Hence, Temasek paid heavy prices for its attempt to acquire

Shin Corp.

Government-linked corporations had an advantage when they attempt to enter foreign

markets especially through acquisitions, because they could expect financial assistance from

the government. However, they were at times hampered by the relative lack of experience in

operating in foreign countries and by the ownership structure. Evidently, they were at the

relative early stage of overseas expansion and yet to acquire sufficient knowledge and

experience that are required to succeed in foreign business. This happens with firms from

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other countries as well; for example, Japanese electronics and automotive firms faced local

political resistance in the U.S. during the 1970s and 1980s with their substantial increase in

exports to that market. They eventually overcame the resistance by shifting their

manufacturing facilities to the U.S. and by being more politically sensitive. Learning from

such experience, managers of government-linked corporations might improve their skills

when operating in foreign countries. However, the Singaporean political culture shaped by the

one-party state without credible opposition parties might render the managers of the

government-linked corporations to be less sensitive toward political resistance in the host

countries. In addition, as compared to the Japanese private sector companies, they were

hampered by the government ownership which often aroused suspicion from foreign

government and their nationals.

Changes in Ownership and Corporate Governance Reform

The state had attempted to reduce its role in government-linked corporations before

the crisis began. The results of this effort, however, were mixed. As shown in Table 5, the

government’s stake in five out of the eight government-linked corporations decreased

(especially in the DBS and SingTel). However, its stake in three of the government-linked

corporations increased, especially in NOL.

Government-linked corporation groups have modified the corporate governance

structures. As the government-linked corporations are increasingly commercially driven and

involved in joint ventures with private sector firms, they have reduced their recruitment of

directors of the board and top management personnel from the civil service sector and

increased that from the corporate sector. As shown in Table 6, there was an increase in the

proportion of independent outside directors in six out of seven government-linked

corporations (which disclose a sufficient clarity on the backgrounds of directors in their

annual reports for our analysis). For example, in SingTel in 1997, the board was composed of

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internally groomed insiders that constituted 80% of the board, one member of the parliament,

one ex-military personnel, and a director of Temasek Holdings, without outside directors. As

of 2006, however, outside directors accounted for 36% of the board of directors of SingTel.

Out of the six government-linked corporations which increased the outsider representation,

however, only NOL reached the Anglo-American standard of having the majority of the board

members as independent outsiders, although the control by the government of the company

remained to be substantial given its ownership increased to over 68 percent.

While the ratio of outside directors had increased in many government-linked firms, a

high level of state control can be seen in the government representation in the leadership

echelon. As shown in Table 7, few board chairs, presidents, CEOs and managing directors

came from the private sector, in spite of the announcement (in mid-2002) of Ho Ching, who

has been appointed as CEO to lead its organizational transformation, including an increase in

the recruitment of professional managers from the private sector, of Temasek Holdings.

Nevertheless, one significant change that can be detected is that the government-linked

corporations which had not made a separation of the roles in Chair and CEO in 1997 (such as

DBS and Keppel Land) eventually did so in 2006, which is in line with the recommendation

in the Singapore corporate governance codes in 2001 and 2005.

Family-controlled Business Groups

Emergence and Growth till 1997

Family-controlled business groups emerged from smaller, private companies which

were founded by immigrants and run by their family members across generations. For

example, the UOB, the largest family-controlled group by total assets in the country, was

founded in 1935 as the United Chinese Bank (which it was called until 1965) by Wee Kheng

Chiang and a group of fellow Chinese businessmen. In 1974, Wee Kheng Chiang’s son Wee

Cho Yaw took over the baton and still continues to serve as the bank’s Chairman and CEO

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today. The bank has expanded tremendously through the acquisition of other banks and non-

financial assets. The OCBC, which is the second largest family-controlled group by total

assets, was incorporated as a limited company in 1932 as a result of the merger of three local

Hokkien family banks. Lee Kong Chian, the largest shareholder (and Chairman from 1938 to

1965), later passed the baton to his son Lee Seng Wee who served as Chairman from 1995 to

2003. The OCBC has acquired numerous commercial and industrial concerns in Singapore

and the region to form a highly diversified conglomerate that resembles the Japanese

horizontal corporate group with cross-ownership among its associated companies and

subsidiaries.

The family-controlled business groups had a long history of regionalizing their

operations even before the state’s regionalization drive. Economically, they engaged in

sectors that promise relatively quick returns on investment such as property development,

finance, and trading. Culturally, they found it advantageous to tap into the existing ethnic

business (or “bamboo”) networks in the region (Tsui-Auch 2005b). CDL (under the mega-

group of Hong Leong), which has diversified beyond Asia, represents an exception. The

celebrated Singaporean entrepreneur, Kwek Leng Beng, the owner of Hong Leong group,

bought his first London hotel, The Gloucester, in 1992, and the CDL group under his stable

invested in Britain’s Copthorne chain of 17 hotels in 1995 (Yeung 2003b).

The family-controlled business groups increased the reliance on stock markets for

financing their expansion since the 1960s. The founding family sought to control the public-

listed companies through an associated bank, financial company, or holding company and

consequently the layers of ownership structure obscure the family’s control of the company.

Raising capital in (international) financial markets, however, requires them to be more

transparent in the governance and financial control systems. This prompted the

professionalization of management. Further, due to their distanced relationship from the state

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capital, Chinese businesses (except the banks) were left to fend for themselves, which averted

the tradition of cronyism and patronage politics in government-business relations (Low

2001a). Often, because of their distanced relationship with the state, they needed to gain

legitimacy in the eyes of the regulatory authorities and the public, and hence tended to take

the state imperative for professionalism seriously.

Nevertheless, the business families maintained family control through direct and

indirect ownership, occupying top management positions, and grooming sons to succeed the

founding patriarchs. This strategy of maintaining family control and corporate rule over

generations while co-opting outside management talent resembles that of government-linked

corporations. Government-linked corporations also recruited outside management talent, but

maintained corporate control and rule in the hands of the closely-knit political elite (Tsui-

Auch and Lee 2003).

Companies within a family-controlled mega group are interlocked in complex formal

and informal relationships, including cross-holdings and interlocking directorates (see Figure

2 and Table 9), and conduct intra-group trade, capital, technology, and personnel transfers

(Loh, Goh, and Tan 2000). Interlocking directorates, which manifest a modern form of

maintaining personal relationships, have replaced traditional information networks and

performed the function of coordination and control in the market place (Zang 1999).

Merger, Divestment and International Diversification

The local banking groups experienced the greatest organizational change as a result of

the liberalization policy that brought about stiff foreign competition in the domestic market.

The other large family-controlled banks swiftly modeled after DBS (which merged with the

state-owned Post Office of Singapore Bank), engaging in mergers and acquisitions to achieve

economies of scale for further growth and expansion. The OCBC acquired Keppel-TatLee

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Bank (previously owned by the government-linked Keppel Group) and United Overseas Bank

made a friendly takeover of the OUB.

In addition, the tightly state-regulated banks were subjected to government pressure to

divest their non-core activities. The overcapitalized UOB group and OCBC group had

untangled cross-shareholdings with affiliated non-banking companies by meeting the limit of

10% of the equity holding in these companies by July 17 2007.

However, the banks and other private sector business groups have made only limited

forays outside Asia. As seen in Table 4, four out of 10 groups (which disclose sufficient data

on diversification in both years) increased the geographical diversification beyond Asia, and

six of them actually reduced its international reach. Although the government urged its

domestic firms to move away from the crisis-ridden South-east Asian region, the Crisis has

opened windows of opportunities for them to strengthen their regional business networks and

alliances with local and foreign firms. Clearly, Asia remains the most important region for

their cross-border investments. Even within the mega group of Hong Leong, a large

proportion of its investments (with the exception of CDL) was located in Singapore and

Malaysia due to the historical legacy of the founders’ families and the accompanying cultural

advantages (Yeung 2003b).

Changes in Ownership and Corporate Governance Reform

Family ownership decreased in eight main firms of the private business groups but

such ownership increased in the four others (see Table 5). Nevertheless, only four out of 11

companies (which report sufficient background information of directors) increased the

outsider representation on the board and none of the family-controlled firms had a majority of

outside directors (Table 6). In addition, only a few of the most senior posts came from the

external labor market (see Table 8). Especially in the mega groups of UOB and of HLF, the

family members occupied the most senior posts and represented the family interests on the

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board. The Chairperson cum CEO of the UOB, Wee Cho Yaw, advocated his ideal model;

“family control with professional management, where the “former provides the direction and

the latter, the expertise.” He said, “To be honest, to leave a company totally to professional

management, I have my reservations” (The Straits Times Oct. 23, 2006: H19, Tsui-Auch

2004).

The infusion of professional managers into the family-controlled groups has not

always proceeded smoothly. At OCBC, the elderly directors of the board who voted with the

founding family stepped down in 2000. OCBC hired Alex Au, a former Hong Kong banker,

as CEO in 1999. Yet Au appeared to lack the board of directors’ support on strategic issues

and resigned abruptly in 2002. Several banking analysts suspected that Au resigned because

Lee Seng Wee (the Chairperson and the largest shareholder) took a hands-on approach in

strategic issues.

The insistence on family control, however, ultimately depends on the availability of

family members to succeed the business. For example, the OCBC, unlike the UOB, has no

successor on the scene. After the resignation of Alex Au, the Lee family has relinquished the

post of CEO to another expatriate manager. Further, Lee Seng Wee stepped down as the

OCBC’s chairman and shifted from executive to non-executive director in 2003. The

chairperson’s post was then handed over to an outsider. Hence, without competent successors

from the family, even the family-controlled groups had to rely on talents from the external

labor market.

COMPETITIVE CAPABILITIES AND CONSTRAINTS OF THE BUSINESS GROUPS

As compared to many state-owned enterprises elsewhere, the government-linked

corporations have generally been recognized to be well managed because they are run like

private sector businesses, with a focus on bottom-line performance (US Embassy of

Singapore 2001, Singh and Ang 1998). Their performance is much debated, however, as some

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argue that it is comparable to their counterparts’ in the private sector (Sun 2002), while others

assert it is below that of their counterparts (Webb and Saywell 2002). Few companies, with

the exception of SIA, have rewarded its shareholders well. Over the past 10 years, for

example, Temasek’s had average shareholder returns of 8% a year, against 9.3% for the

Straits Times Index (Financial Times¸ 3 August 2007)

The state serves as both an enabling mechanism and a constraint to the growth of

government-linked groups (Dicken and Yeung 1999). On the one hand, strong relationships

with the government brought along financial privileges and useful information on policy

directions. On the other, the government-linked label and experience have also hampered

their growth. Government-linked corporations which used to operate in the highly regulated

sectors of industries with national strategic concerns, naturally ventured into similar industries

through their international expansion. Thus, they inevitably induced hostility from host

country governments and nationals (e.g., in China, Australia, Thailand, and Indonesia), as

they were concerned that their strategic industries might fall into the hands of a foreign

government, the ultimate owner of the government-linked corporations.

That the Singaporean government has claimed a relinquishing of its control over the

government-linked corporations might not convince the foreign governments and nationals

given the persistently high level of state ownership in these companies and the relatively low

proportion of outside directors on their boards. Although the government-linked corporations

claim that they are run on business principles, they are ultimately accountable to their major

shareholder, the Temasek Holdings, which is in turn owned by the Ministry of Finance.

Further, due to its private limited company status, the Temasek Holdings is not required to

make public its accounts of operations. The lack of transparency on decisions and operations

further reinforced the suspicions of local partners, government, and nationals in host countries.

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In addition, managers of Temasek and its subsidiaries did not seem to be properly

trained to navigate the political economy of emerging markets, although many of them are as

well qualified in terms of their formal education (e.g., MBA) as the managers in the private

sector firms. The failure of Suzhou industrial Park in China in the 1990s demonstrates that

Temasek companies which had done remarkably well in Singapore were incapable of

managing their Chinese investments. These government-linked corporations, which were so

used to a contractual business culture in Singapore, proved to be excessively formalistic in

China’s emerging business community (Kumar et al. 2005) and failed to navigate in the

complex system with an important role for interpersonal guanxi, for which family-controlled

businesses that used to rely on could handle well (Yeung 2003b). In the recent stumbled deal

in Thailand, the managers of Temasek Holdings failed to detect the hostility of the nationals

in the country where political democratization reforms were advancing in parallel with

growing affluence. It is likely that government-linked corporations’ future investments in

Thailand will be subjected to tight scrutiny and that the search for local partners will be

challenging.

Even though government-linked corporations such as NOL and SingTel have

expanded in terms of size and geographical extent, it is questionable if its operations are

functionally integrated because they run their foreign operations as independent entities. This

may reflect their choice of expansion strategy, namely, unrelated diversification which does

not require high degrees of functional integration or transfer of core competencies between

business units as the strategy of related diversification requires, but manage independent units

through financial control (Hoskisson and Hitt 1988). This strategic choice might be

reasonable given the relative lack of operating experience in overseas markets at the early

stage of overseas expansion of these corporations. Although investors who seek financial

returns do not usually favor unrelated diversification because theory says that such strategy is

18

often value destroying (Amihud and Lev 1981, Berger and Ofek 1995), government-linked

corporations can afford to do so because of their dominant positions in the domestic market.

The management of government-linked corporations can be less accountable to other

shareholders, which allows them to pursue unrelated diversification. Further, they may be

pursing unrelated diversification overseas in order to expand markets for their various

businesses due to the limited growth opportunities in the domestic market. In fact, some

commentators pointed out that government-linked corporations would be tempted to expand

overseas so as to avoid divestment (Goldstein et al. forthcoming), which eventually defeats

one of the state policies.

The fundamental belief that government-linked corporations are instruments for nation

building and safeguards of national security is likely to inhibit their full divestment (Webb

and Saywell 2002). This belief is reinforced by the continued recruitment of ex-civil servants

into board and senior management positions, though to a lesser extent. These personnel, who

tend to be risk-adverse, are likely to resist divestment and greater competition from the private

sector (US Embassy Report 2001, Saywell and Plott 2002). Further, the government, as the

largest shareholder, has relative autonomy to ignore market pressures from institutional

investors to divest its equity in these corporations. Even among those which shed non-core

assets, such divestment may not be genuine as the asset could be sold to another government-

linked corporation which was under the state’s ownership control, as shown in the DBS’s sale

of DBS Land to a subsidiary of Singapore Technologies.

Unlike the government-linked corporations which received financial privileges from

the state, many private sector groups started off as small- and medium-sized enterprises.

Despite the visible hand of the Singaporean state, the private sector has maintained much of

its entrepreneurial drive. In fact, the early move of Kwek Leng Beng to acquire British hotels

was followed by a wave of Singaporean acquisitions of European hotels both by private sector

19

firms and government-linked corporations. Nevertheless, the high degree of international

diversification of CDL was an exception even within the Hong Leong mega group. Indeed,

regionalization strategy is still preferred because of geographical proximity and cultural

advantages. Their capabilities in network formation and exploitation in Asia endowed them

with competitive advantage over Western firms in the region and hence it does not make

economic sense to give up privileged access to markets and information in Asia. Moreover,

the challenges to build and maintain a direct presence outside Asia are tremendous and the

difficulty to transplant their business networks is immense, as shown in the initial grave

difficulties of Japanese firms in the West (Hu 1995).

To finance the expansion, family-controlled firms listed their companies in the stock

exchanges in Singapore or elsewhere. They adapted to the listing requirements including

governance and auditing. They adopted professional management even before the Asian

Currency Crisis, with outside managers providing the expertise and the controlling families

providing the strategic directions. The controlling families maintained control through cross-

ownership and interlocking directorate. As compared to the government-linked groups,

private sector business groups (banks, to a lesser extent) are freer to disregard government

pressure, both in rhetoric and practice, for recruiting a higher proportion of independent

directors. This freedom is perhaps reflected in a lower percentage of private sector firms

showing an increase in outsider representation than the government-linked corporations.

Despite the normative pressures for the professionalization of governance and

management, both family-controlled groups and government-linked groups have maintained

significant ownership of and control over their enterprises. This reflects embeddedness in the

norms of trusting insiders and cultural preferences for control that are fundamental to the local

institutional environment (Tsui-Auch and Lee 2003, Tsui-Auch 2004). To expand, these

groups will need fresh perspectives and resources beyond those offered by trusted insiders,

20

regional network ties, and traditional business activities. Actions in tune with such norms

might have enhanced not only legitimacy but also efficiency in past operations, as close,

personal connections make for good collaboration (Biggart 1991) and tight control forges

integration and economical use of resources (Mauzy and Milne 2002). With increasing

integration into the world economy and generational changes in leadership, however, business

groups will have few alternatives but to loosen their control, although they will do so only

slowly and with great internal resistance.

21

Endnote:

1. Although government-linked corporations are clearly vital to Singapore’s economy, there is no precise measure of their centrality. The Ministry of Finance (1993) estimated that the public sector and government-linked corporations accounted for 60% of Singapore’s GDP. However, the Ministry of Trade and Industry's Department of Statistics (2001) estimated that government-linked corporations contributed only 12.9% of GDP in 1998, and that the non-government-linked public sector corporations (such as the statutory boards) accounted for another 8.9%, for a total public sector share of 21.8%. This estimate is low relative to the contribution of multinational corporations, (i.e., 42%) (Low 2001b). Nevertheless, this latter estimate includes only government-linked corporations in which the government holds equity of at least 20%.

22

References

Amihud, Y., and B. Lev. 1981. Risk reduction as a managerial motive for conglomerate mergers. Bell Journal of Economics, 12(2): 605-617. Arnold, W. 2006. Bangkok insists phone deal broke law. International Herald Tribune, 16 November. Berger, P.G., and Ofek, E. 1995. Diversification’s effect on firm value. Journal of Financial Economics, 37(1): 39-65. Biggart, N.W. 1991. Explaining Asian economic organization: Toward a Weberian institutional perspective. Theory and Society 20:199-232. Business Times. 2005. Fock Siew Wah to step down from DBS board. April 1. Dicken, P. and H. W-C Yeung 1999. Investing in the future: East and Southeast Asian firms in the global economy. K.Olds et al. (eds.) Globalization and the Asia-Pacific, 107-128. London: Routledge. Financial Times 2007. Temasek warns of tougher future. 3 August. Goldstein, A. and P.Pananond. forthcoming. Singapore inc. goes shopping abroad: Temasek’s acquisition of Shin corp. in perspective. Journal of Contemporary Asia.

Hamilton-Hart, N. 2000. The Singapore state revisited, The Pacific Review, 13 (2):195-216. Hoskisson, R.E., and M.A. Hitt. 1988. Strategic control systems and relative R&D investment in large multiproduct firms. Strategic Management Journal, 9: 605-621. Hu, Y-S 1995. The international transferability of the firm’s advantages. California Management Review 37(4): 73-88. Jayasankaran, S. 2001. Blueprint for an Asian superbank. Far Eastern Economic Review 29 March: 48-51. Kumar, S., S. Siddique and Y. H. Wong 2005. Mind the Gaps: Singapore Business in China, Singapore: Institute of Southeast Asian Studies. Loh, G., C.B.Goh and T.L.Tan. 2000. Building Bridges, Carving Niches: An Enduring Legacy. Singapore: Oxford University Press. Low, L. 2001a. The Political Economy of Chinese Banking in Singapore. Research Paper Series, #2001-015, Faculty of Business Administration, National University of Singapore. Low, L.2001b. The Singapore developmental state in the new economy and polity. The Pacific Review14 (3):411-41. Mauzy, D.K. and R.S. Milne. 2002. Singapore Politics Under the People's Action Party. London and New York: Routledge.

23

Ministry of Finance. 1993. Interim Report of the Committee to promote enterprise overseas. Singapore Government.

Pereira, A. 2005. Singapore’s regionalization strategy, Journal of the Asia Pacific Economy, 10(3): 380–396. Rodan, G. 1989. The Political Economy of Singapore's industrialization: National State and International Capital. Basingstoke: Macmillan. Saywell, T. and D. Plott. 2002. Re-Imaging Singapore. Far Eastern Economic Review. 11 July: 44-47. Singapore Department of Statistics 2001. Contribution of Government-Linked Companies to Gross Domestic Product. March. Singapore: Ministry of Trade and Industry. Singh, K. and S. H. Ang. 1998. The strategies and success of government-linked corporations in Singapore. Research Paper Series #98-06. National University of Singapore, Faculty of Business Administration. Straits Times, The 2006. UOB’s Wee Cho Yaw makes case for family-run businesses. Oct. 23: H19. Sun, Q. 2002. The Performance of Singapore Government-Linked companies. Pulses, Oct.27-29. Singapore: Singapore Exchange. Temasek Holdings Limited 2002. The Temasek Charter. www.temasekholdings.com.sg Tsui-Auch, L. S. 2004. The Professionally managed family-ruled business: Ethnic Chinese business in Singapore, Journal of Management Studies 41 (4): 693-723. Tsui-Auch, L.S. 2005a. Singapore business group: The role of the state and capital in Singapore Inc. S-J. Chang (ed.), Business Group in East Asia: Financial crisis, restructuring, and new growth, pp.94-115. Oxford: Oxford University Press. Tsui-Auch, L.S. 2005b. Unpacking regional ethnicity and the strength of ties in shaping ethnic entrepreneurship, Organization Studies, 26(8): 1189-1216. Tsui-Auch, L.S. and Y-J Lee. 2003. The state matters: management models of Singaporean Chinese and Korean business groups. Organizational Studies 24 (4): 507-534. US Embassy of Singapore 2001. Government-linked corporations face the future. March. http://singapore.usembassy.gov/ep/2001/government-linked corporation 2000.html Vasil, R. 1995. Asianising Singapore: The PAP's management of ethnicity. Singapore: Heinemann Asia. Webb, S. and T. Saywell. 2002. Untangling Temasek. Far Eastern Economic Review. 7 Nov., 42-46.

24

25

Worthington, R. 2003. Governance in Singapore. New York: RoutledgeCurzon. Yeung, H.W-C. 2000. State intervention and neoliberalism in the globalizing world economy: lessons from Singapore’s regionalisation programme . The Pacific Review 13 (1): 133-162. Yeung, H.W-C. 2003a. Managing economic (in)security in the Global Economy: Institutional Capacity and Singapore's Developmental State. A revised paper presented at the conference on 'Globalization and economic security in East Asia: governance and institutions,' 11-12 Sept. Institutional of Defense and Strategic Studies, Nanyang Technological University, Singapore. Yeung, H. W-C 2003b. Chinese Capitalism in a global era. London: Routledge. Zang, X 1999. Personalism and corporate networks in Singapore. Organization Studies 20(5): 861-877.

26

Table 1: Basic Information of the 30 Largest Business Groups in Singapore

Ranks By total assets of the

groups

Main Companies

Abbreviations of the

companies (commonly

used in media reports)

Group names

(country of origin)

Total assets of the groups (S$)

Type of Ownership(G: government-

linked corporation F: Family-controlled;

N/F: Non-family-controlled)

Ownership of the main

company by the largest

shareholder

No. of associated companies

of the groups

No. of subsidiaries of the groups

No. of Sectors Involved

by the groups

Market capitalization of the main company to

the Total Market

Capitalization of SGX

Main industries

involved by the groups

Total Sales of the groups (S$)

1 DBS Group Holdings Limited DBS DBS group

(Singapore) 175,671,000,000 G (THL) 28.08% 17 88 3 8.15% Banking & Finance 4,011,000,000*

2 United Overseas Bank Limited UOB UOB group

(Singapore) 134,878,566,000 F (Wee Cho Yaw's Family) 21.82% 21 95 4 7.05% Banking &

Finance 3,661,340,000*

3

Oversea-Chinese Banking Corporation Limited

OCBC OCBC group (Singapore) 119,881,675,000 F (Lee Seng Wee's

Family) 19.29% 16 43 3 5.74% Banking & Finance 2,560,201,000*

4 Singapore Telecom Limited SingTel

SingTel group

(Singapore) 36,857,000,000 G (THL) 56.50% 36 139 4 13.07% Telecom &

Post 11,994,700,000

5 Singapore Airlines Limited SIA SIA group

(Singapore) 19,990,000,000 G (THL) 56.67% 32 24 5 5.12% Transportation 9,761,900,000

6 Jardine Matheson Holdings Limited JMH Jardine group

(Hong Kong) 17,325,808,000N/F (Jardine

Matheson Holdings Limited)

53.41% 3 8 7 4.83% Management Consultancy 14,689,272,000

7 Jardine Strategic Holdings Limited JSH Jardine group

(Hong Kong) 14,243,844,800N/F (Jardine

Matheson Holdings Limited)

80.13% 1 4 7 5.22% Management Consultancy 9,486,616,800

8 Hongkong Land Holdings Limited HKL Jardine group

(Hong Kong) 13,941,380,080N/F (Jardine

Strategic Holdings Limited)

46.72% 11 18 3 3.34% Property 669,942,160

9 City Developments Limited

CDL Hong Leong

group (Singapore)

11,121,946,000 F (Kwek Leng Beng's Family) 48.62% 84 223 3 2.75% Property 2,380,097,000

10 Keppel Corporation Limited

Keppel Corp Keppel group (Singapore) 10,499,788,000 G (THL) 21.92% 39 144 8 3.31% Multi-industry 3,963,233,000

11 Fraser and Neave Limited F&N OCBC group

(Singapore) 8,121,832,000 F (Lee Seng Wee's Family) 22.06% 52 166 6 1.26% Food &

Beverage 3,446,000,000

12 Neptune Orient Lines Limited NOL NOL group

(Singapore) 7,154,579,419 G (THL) 68.21% 45 123 1 0.73% Transportation 10,717,692,426

13 Asia Food & Properties Limited

AF&P

Asia Food & Properties

group (Singapore)

6,323,451,000 F (Franky Oesman Widjaja's Family) 65.55% 43 156 9 0.47% Food &

Beverage 2,513,188,000

27

14 Hong Leong Finance Limited HLF

Hong Leong group

(Singapore) 6,309,694,000 F (Kwek Leng

Beng's Family) 47.04% 0 2 3 0.40% Banking & Finance 242,322,000*

15 Keppel Land Limited Keppel Land Keppel group

(Singapore) 4,576,122,000 G (Keppel Corp) 52.78% 30 102 4 1.18% Property 476,165,000

16 UOL Group Limited UOL UOB group

(Singapore) 3,478,091,000 F (Wee Cho Yaw's Family) 28.31% 6 48 5 0.82% Property 411,815,000

17 United Industrial Corporation Limited

UIC UOB group (Singapore) 3,428,890,000 F (Wee Cho Yaw's

Family) 26.91% 10 48 5 0.69% Property 296,742,000

18 China Merchants Holdings (Pacific) Limited

CMH

China Merchants

Group (Hong Kong)

3,381,008,000 N/F (China Merchants Group) 71.92% 12 49 3 0.09% Building &

construction 2,607,000

19 Noble Group Limited NG

Noble Holding

Group (Hong Hong)

3,301,811,000 F (Richard Samuel Elman's Family) 37.40% 3 30 5 0.64%

Finance, Transportation, Engineering

14,119,801,513

20 Singapore Land Limited SG Land UOB group

(Singapore) 3,093,049,000 F (Wee Cho Yaw's Family) 72.42% 8 27 3 0.85% Property 187,870,000

21 Dairy Farm International Holdings Limited

DFI Jardine group

(Hong Kong) 2,899,043,280

N/F (Jardine Strategic Holdings

Limited) 78.07% 5 14 2 1.09% Retailing &

Trading 6,479,164,400

22 Jardine Cycle & Carriage Limited JCC Jardine group

(Hong Kong) 2,378,122,720N/F (Jardine

Strategic Holdings Limited)

63.60% 18 51 4 1.21% Engineering 2,301,319,280

23 Singapore Petroleum Company Limited

SP

Singapore Petroleum

group (Singapore)

2,296,793,000 G (THL) 44.91% 10 12 3 0.54% Engineering 4,974,447,000

24 Mandarin Oriental International Limited

MOI Jardine group (Hong Kong) 2,282,323,120

N/F (Jardine Strategic Holdings

Limited) 74.89% 9 12 1 0.40% Hotels &

Restaurants 551,543,680

25 Wing Tai Holdings Limited Wing Tai

Wing Tai group

(Singapore) 2,242,131,000 F (Cheng Wai

Keung's Family) 39.69% 18 33 4 0.39% Property 274,455,000

26 GuocoLand Limited GL

Hong Leong group

(Singapore) 2,124,799,000 F (Kwek Leng

Beng's Family) 70.52% 8 63 2 0.41% Property 300,061,000

27

Pacific Century Regional Developments Limited

PCRD

Pacific Century

Group (Hong Kong)

2,105,974,000 N/F (Jason Fedder) 75.33% 9 21 5 0.26% Telecom &

Post, Property, Finance

410,902,000

28 SembCorp Logistics Limited SembLogistics

SembCorp Group

(Singapore 2,044,534,000 G (THL) 62.50% 23 50 3 N.A

Transportation, Storage &

Telecom 769,256,000

29 SembCorp Marine Limited SembMarine

SembCorp Group

(Singapore) 1,859,365,000 G (THL) 62.04% 12 33 4 1.19% Engineering 1,362,764,000

30 WBL Corporation Limited WBL OCBC group

(Singapore) 1,840,758,000 F (Lee Seng Wee's Family) 36.51% 14 144 5 0.22% Engineering 1,829,596,000

Notes: * This refers to “interest income” (for companies in the banking and finance sector) rather than “sales”. Data on the ranks by total assets and on total assets are from 2004, and the rest are from 2006. Sources: 2006 Annual reports of companies

28

Table 2: Principal Activities of the Singaporean Business Groups Business

Groups Banking & Finance

Hotels & Restaurants

Investment &

StockbrokersProperty Telecom

& Post Transpor-

tation

Retailing &

Trading

Building & construction Engineering Food &

BeverageOthers

Total no. of sectors involved

DBS 3 SingTel 4 SIA 4 NOL 1 SPC 3 Keppel Corp. 8 Keppel Land 4 Semb Marine 4 UOB 4 UOL 5 UIC 5 SG Land 3 OCBC 3 F & N 6 WBL 5 CDL 3 HLF 3 GuocoLand Limited 2 AF&P 7 Wing Tai 4

Sources: Annual reports of the companies

29

Table 3: Percentage of Subsidiaries of Government-Linked Groups that

Engaged in Non-Core Activities out of the Total Number of Subsidiaries of the Groups in 1997 and 2006

Names of Business Groups

1997 (%) 2006 (%)

DBS 8.82% 5.17% SingTel 44.90% 23.97% SIA 21.05% 14.29% NOL 28.04% 0% SPC 22.22% 44.44% Keppel Corp. N.A* N.A* Keppel Land 6.31% 7.14% SembMarine 21.05% 28.21%

N.A.: inapplicable due to a lack of information stated in the annual reports.

30

Table 4: Percentage of Subsidiaries of Business Groups that Operated Outside Asia out of the Total Number of Subsidiaries

Types of Business Groups

Names of Business Groups

1997 (%) 2006 (%)

DBS 2.94% 20.00% SingTel 20.41% 53.72% SIA 10.53% 4.76% NOL 46.73% 60.00% SPC N.A 50.00% Keppel Corp. 11.02% 13.10% Keppel Land 7.21% 3.57%

Government-linked corporations

SembMarine 0.00% 12.82% UOB 10.14% 16.67% UOL 37.14% 12.77% UIC 2.08% 0.00% SG Land N.A 0.00% OCBC 5.97% 5.13%* F&N 2.08% 21.40% WBL 21.11% 12.26% CDL 5.26% 40.70% HLF 0 N.A GuocoLand 4.35% 7.22% AF&B 25.83% 18.82%

Family-controlled

Wing Tai 1.96% 0.00%

*The figure is calculated based on OCBC’s annual report of 2005 because there is insufficient information in that of 2006.

N.A.: inapplicable due to a lack of information stated in the annual reports.

31

Table 5: Equity Holding in the Group Core Company by the Largest Block Shareholder in 1996 and 2006

Core Companies 1997 (%) 2006 (%)

Government-linked corporations DBS 40.45% 28.08% SingTel 82.17% 56.50% SIA 54.32% 56.67% NOL 33.35% 68.21% SPC 61.75% 44.97% Keppel Corp. 33.03% 21.92% Keppel Land 58.34% 53.33% SembMarine 59.82% 62.04% Family-controlled corporations UOB 31.65% 21.82% UOL 40.02% 28.31% UIC 26.85% 26.91% SG Land 56.47% 72.42% OCBC 40.47% 19.29% F&N 25.64% 22.06% WBL 29.81% 25.84% CDL 48.44% 48.62% HLF 54.65% 47.04% GuocoLand 57.49% 72.78% AF&B 73.74% 65.55% Wing Tai 42.20% 39.69%

32

Table 6: Percentage of Outside Directors on Board of the Core Companies of the Business Groups

Core Companies

1997 (%) 2006 (%)

Government-linked corporations DBS 10 17 SingTel 0 36 SIA 11 27 NOL 38 54 SPC 13 33 Keppel Corp. 0 18 Keppel Land 10 8 SembMarine N.A 22 Family-controlled UOB 44 30 UOL 0 0 UIC 25 N.A. SG Land 14 13 OCBC 11 21 F&N 25 40 WBL 0 22 CDL 18 0 HLF 17 30 GuocoLand 50 29 AF&B 36 13 Wing Tai 33 18

Notes: In the case of NOL, information on the backgrounds of 2 out of 10 directors was insufficiently stated and hence we take into account only 8 directors. For the same reason, we take into account only 8 out of 11 directors in the case of SP.

N.A.: inapplicable due to a lack of information on the majority of directors.

33

Table 7: Identities of Board Chair/President, CEOs/Managing Directors in government-linked corporations, 1997 and 2006

Core Companies Board Chair/President 1997

2006

CEO/MD 1997

2006

DBS G G G G SingTel G P G G SIA G G G G NOL G G G P SPC P G G G Keppel Corp. G G G G Keppel Land G G G G SembMarine G G G G

G: government-linked (serving in government-linked corporations, Statutory Boards, Civil Service, Army, or as MPs and Ministers P: Private sector

34

Table 8: Relationships of Board Chair/President, CEOs/Managing Directors to the Controlling Families of the Private Business Groups in 1997 and 2006

Core Companies Chairman 1997

2006

CEO/MD 1997

2006

UOB F F F F UOL F F F F UIC F F F F SG Land F F F F OCBC F N F N F&N N* N* F F WBL F F F N CDL F F F F HLF F F F F GuocoLand F F F F AF&B F F F F Wing Tai F F F F

F: family-related members N: non-family-related members * long-time associate

35

Table 9: Interlocking Directorate within a Family-controlled Business Group: An Example of OCBC

OCBC F & N WBL

The Straits Trading

Company Limited

Asia Pacific Breweries

Limited

United Engineers

Limited

Singapore Reinsurance Corporation

Limited

Robinson And Co Limited

Bukit Sembawang

Estates Limited

Great Eastern Holding Limited (Only listed in the Year 2000)

OCBC - - - - - - - - -

F&N 1 - - - - - - - -

WBL 2 0 - - - - - - -

The Straits Trading Company Limited 0 0 1 - - - - - -

Asia Pacific Breweries Limited 0 1 0 0 - - - - -

United Engineers Limited 0 0 1 1 0 - - - -

Singapore Reinsurance Corporation Limited

0 0 0 0 0 0 - - -

Robinson And Co Limited 1 0 2 1 0 0 0 - -

Bukit Sembawang Estates Limited 1 0 1 1 0 0 1 0 -

Great Eastern Holding Limited (Only listed in the Year 2000)

5 1 1 2 0 0 1 1 2

Figure 1: The Singaporean Business Groups at Mega Group and Firm-based Group Levels

Singaporean Business Groups

Government-linked corporations Family-controlled groups

TEMASEK HOLDINGS

DBS SingTel SPC NOL Keppel Corp SIA SembMarine

The Wee Family

UOB

UOL

UIC

SG Land

The Lee Family The Kwek Family The Cheng Family The Widjaja Family

OCBC

F&N

WBL

CDL

HLF

Guocoland

WingTai AF&B

Keppel Land

36

Figure 2: Cross-ownership within a Family-controlled Business Group: An Example of OCBC

WBL Corporation Limited

Oversea-Chinese Banking Corporation

Limited

Lee Foundation

19.29%

Bukit Sembawang

Estates Limited25.64%

Fraser and Neave

Limited

Great Eastern Holdings Limited

3.98%

18.08%

Asia Pacific Breweries Limited 7.92%

72.1%

Robinson & Co Limited

6.05%

86.9%

Singapore Reinsurance

Corporation Limited

8.27%

The Straits Trading Company

Limited

6.2%

19.92% 10.67%

6.48% 19.36%

United Engineers Limited

14.11%

12.22%

9.97%

37