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Why S’pore should not sell off its iconic firms

Yet another national icon could be heading into foreign hands: Neptune Orient Lines (NOL) is up for sale. Started in 1968 as Singapore’s national shipping line, the company has grown to become one of the world’s largest container transportation companies.

Yet another national icon could be heading into foreign hands: Neptune Orient Lines (NOL) is up for sale. Started in 1968 as Singapore’s national shipping line, the company has grown to become one of the world’s largest container transportation companies.

Rumours about a sale started in July after an article appeared in The Wall Street Journal, and NOL’s third-quarter financial loss revived the discussion.

In a Nov 21 statement, NOL said it had entered into exclusive talks with France’s CMA CGM over a potential takeover.

A sale of NOL would follow in the footsteps of a multitude of other iconic national brands that have been sold over the years.

One of the first was CPG Corporation, formerly the Public Works Department, which was responsible for much of Singapore’s public infrastructure.

Temasek Holdings sold it to Australian-based engineering giant Downer EDI for S$131 million in 2003. It was subsequently sold in 2011 to China Architecture Design and Research Group (CAG), a Chinese state-owned architecture and design institute.

Next was the far-higher-profile sale of the Raffles Hotel to Colony Capital, an investment firm based in Los Angeles, in 2005.

At the time of the sale, Colony Capital’s chief executive Thomas Barrack said “we deeply respect the historical significance of the Raffles Hotel Singapore and we consider it our responsibility to protect that legacy”. However, Raffles was sold again in 2012 to Qatar National Hotels Company, owned by the Qatar government and now called Katara Hospitality.

The sale of the Raffles Hotel was followed by OCBC selling its stake in Robinsons department store to Indonesia’s Lippo Group in 2006. The Al-Futtaim Group, a large conglomerate operating in the United Arab Emirates, then bought 88 per cent of Robinsons in 2008.

In 2012, Singapore conglomerate Fraser and Neave (F&N) sold its stake in Tiger Beer to Dutch brewer Heineken.

Next up may be NOL, which had been offered to prospective buyers in recent months, according to media reports. Temasek Holdings, the Singapore Government’s investment company which owns about 65 per cent of NOL, is looking to sell a business which is currently losing money

It might seem like selling iconic brands hardly matters, if it makes financial sense.

After all, the Raffles Hotel is still in Singapore, Tiger Beer is still available here and shoppers still go to Robinsons.

However, a critical question is whether Singapore risks losing more of its national identity and reducing its economic prospects if companies continue to be sold off.

PROTECTING NATIONAL IDENTITY

Many have lamented the sale of national brands, and former F&N CEO Han Cheng Fong put it especially well in a letter published by the media at the time of the Tiger sale.

“Iconic brands and businesses are the economic soul of the nation. When we raise a can of ... Tiger Beer to our lips, especially when we are a long way from home, we feel a sense of attachment to Singapore. Unless we take pride in and protect our national icons and heritage, we will lose our national identity,” he wrote.

Research has indeed reinforced the importance of national brands for national identity.

Professor Sandy Bullmer from Massey University in New Zealand, for example, found that “brands affect national identity”. Despite today’s consumers having a global outlook, she said, globalisation has simultaneously created a desire for a local identity that makes national brands important.

In New Zealand, classic New Zealand products such as Wattie’s tomato sauce and Red Bands gumboots reinforce national identity through stories that focus on their roots and emphasise social values such as inventiveness and entrepreneurship.

Along with bolstering national identity, consultancy firm FutureBrand found that “country of origin” brands drive everyday consumer choice. These choices can directly affect the gross domestic product (GDP) of a country through sales of products and services when people prefer and choose a national brand.

Such brands, it said, can also contribute significantly to national reputation and country brand strength.

In the case of NOL, the company contributes to Singapore’s economy in ways beyond just its revenue of US$1.2 billion (S$1.7 billion). Its APL was named Container Line of the Year this year by Lloyd’s List Asia for its exceptional performance in ship operations, and it also won the Investment in the Future Award for its outstanding training and education programmes for its employees and seafarers.

Shipping analyst firm Drewry also said PSA International — which is wholly owned by Temasek — could benefit from having NOL and its G6 Alliance partners increase usage of Singapore’s new mega-port at Tuas once it opens.

The experience with CPG also showed how selling off a company could lead to the loss of expertise, as Singapore arguably lost some building experience and capabilities when Downer EDI took over it.

Perhaps having learnt a lesson from that sale, a similar firm, Surbana International Consultants, was not sold. Instead Surbana, which used to be the Building and Development Division in the Housing and Development Board, was acquired by Temasek in 2004 and remained a locally-owned, internationally-renowned building and urban consultancy.

Earlier this year, Surbana was merged with Jurong International Holdings, a subsidiary of JTC, into Surbana Jurong.

HOLDING ONTO NOL

The essential question, then, is whether Singapore should continue to sell off companies that are iconic national brands.

While some countries may not have such a choice, Temasek Holdings’ ownership stake in both longstanding and newer national brands gives reason to reflect on this question as it holds large stakes in such companies.

Temasek has thus far not commented on possible reasons for the proposed sale, and it may well have strategic or other reasons to sell its shares in NOL and other companies.

A better strategy, however, could be to look at how to keep the national brands. While it may mean losing some money at this point, NOL could make money in the future too.

Rather than selling companies such as NOL for shorter-term financial objectives, perhaps it is time to figure out how to continue to own them for long-term national benefit.

ABOUT THE AUTHOR:

Richard Hartung is a financial consultant living in Singapore since 1992.

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