Lee Kuan Yew vs. Warren Buffett - Round 2

Some time last week, Lee Kuan Yew made a few comments about GIC's investments in the big banks, and also about Warren Buffett. He said in a Bloomberg interview:

Singapore's GIC May Seek More Bank Assets, Lee Says
By Haslinda Amin and Linus Chua

April 30 (Bloomberg) -- Government of Singapore Investment Corp. may add more bank assets to its $18 billion of investments in UBS AG and Citigroup Inc. as it chases stable returns over periods as long as 30 years, Minister Mentor Lee Kuan Yew said.

The Singapore sovereign wealth fund, which manages more than $100 billion, bought stakes in the two banks as they sought to repair balance sheets after writedowns linked to U.S. subprime mortgages. GIC, as the fund is known, may hold the stakes for two to three decades, said Lee, who's GIC's chairman.

``If there are other banks of the quality of the two that we bought into, with the promise and the capabilities and inherent capabilities to recover, we have got the liquidity to meet it, to make such an investment,'' Lee, 84, said in a Bloomberg Television interview late yesterday. ``We will not rule it out.''

This week, Warren Buffett, the wealthiest man in the world, gets his chance to give his take on the credit crunch and the banking sector:

Buffett says U.S. in recession; banks to face pain
Sun May 4, 2008 7:51pm EDT

OMAHA, Nebraska (Reuters) - Warren Buffett on Sunday said he does not expect financial markets to panic as write-downs and losses for bad debts mount in the financial services industry, but said those losses were not over "by a long shot."

The world's richest person, who runs Berkshire Hathaway Inc, said at a press conference the Federal Reserve brought markets back from a precipice in March in helping broker JPMorgan Chase & Co's purchase of Bear Stearns Cos, which was on the brink of bankruptcy.

"There's going to be more pain, sure," Buffett said. "The action of the Fed, in terms of Bear Stearns, prevented in my opinion the contagion where you're essentially going to have bank runs on the investment banks ... The idea of a financial panic ... has been pretty well taken care of. That was a watershed event."

He added, though: "That doesn't mean the losses are over by a long shot ... We've looked at some of the investment banks, and it's clear some more losses are going to be incurred."

Is Lee Kuan Yew listening?

He showed he clearly didn't listen to Jim Rogers by making comments about GIC possibly buying into more banks. And he most probably isn't listening to Warren Buffett either. Hell, Lee doesn't even really understand Warren Buffett's investment philosophy.

Buffett was speaking at his annual shareholder meeting, and had more to add:

In a question-and-answer session at the shareholder meeting, Buffett said that from a risk perspective, some banks got ``too big to manage.''

Sound familiar? What's the biggest bank in the world? I think it's one of the banks that Lee Kuan Yew's GIC invested in: Citigroup! which according to LKY, has

"an enormous spread worldwide as a retail bank".

Well, now we really know what an "enormous spread" is - it's a liability.

To finish off, be sure that it's not just about words, but it's also about making prudent investment decisions. Warren Buffett, like LKY & GIC, had the chance to pick up a stake in the banks. But Mr Buffett chose differently:

And Mr Buffett said banks need better risk management. He said he recently considered the prospects of a large investment bank, which he did not identify, by reading its 270-page annual report. He said he highlighted 25 pages where he did not understand what he had read.

'I decided not to pick that one,' Mr Buffett added.

Lee Kuan Yew and GIC, however, decided to plonk billions into Citigroup and UBS, now two of the greatest loss making banks since the credit crunch began.

Who do you think made the correct decision? Mr. Buffett or Mr. Lee?

I seriously think there's no debate!

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[Update - A reader has kindly informed:
"LKY is a senior advisor to Citigroup which means that he get millions off from Citigroup from deal, salary and payment every month, every year.
http://www.citigroup.com/citigroup/press/2006/060905c.htm
Please add this important disclosure as it might shred light why LKY is so eager to invest in frailing banks."]

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Related Posts:
Lee Kuan Yew Ain't No Warren Buffett
GIC, UBS & Jim Rogers

Is an Incompetent Cabinet What We Have?

As of the writing of this post, it has been no less than 65 days since Mas Selamat made his escape from the Whitney road detention center (WRDC). Most of the attention and writings in the blogosphere and the press to date surround the question of whether DPM Wong Kan Seng should resign from his post. Especially taking center stage has been the manner of the government's accountability and the way PM Lee Hsien Loong exonerated DPM Wong from any fault with regards to Mas Selamat's escape.

While these are certainly important and valid issues to raise, I fear that harping over whether WKS should resign is to risk losing the forest for the trees. Yes, WKS is the minister overseeing the ISD and the WRDC. But demanding his resignation because of the operational lapses at WRDC is a tough act, as WP Opposition leader Low Thia Khiang found out when he was forced into an embarrassing silence by the PM. This is simply because it is difficult to draw a direct link between Wong Kan Seng and the lack of grills on the window that Mas Selamat used to escape.

What, perhaps, is more telling about the competence of the government, and what netizens need to turn their attention to, is the fact that the cabinet ministers are now directly responsible for the recapture of Mas Selamat. There is no doubt about their responsibility for the coordination of National Security and there is no question that they are ultimately responsible for a failure to recapture Mas Selamat.

Mas Selamat has been at large for a lengthy period of time. If Mas Selamat is still in Singapore, then we seriously have to question the competence of our internal security forces for being unable to catch the man in tiny Singapore. If Mas Selamat has escaped our shores, again we have to question the competence of our internal security forces and border defences for letting the man escape.

Here is the low down on the main characters involved:

1. Prime Minister Lee Hsien Loong as the head of the government will bear overall responsibility for the coordination of the various ministries and government bodies responsible for the capture of Mas Selamat. The Prime Minister's Office oversees the National Security Coordination Secretariat (NSCS), tasked with national security planning and the coordination of policy and intelligence issues. A branch of the NSCS, the Joint Counter Terrorism Centre (JCTC), is a multi-agency centre which provides strategic analysis of terrorism-related issues to support policy-making and the development of counter-terrorism capabilities; as well as providing strategic early warning of terrorism-related developments.
2. Deputy Prime Minister Wong Kan Seng is the Minister for Home Affairs, and oversees the following government bodies directly related to Mas Selamat's recapture:

• Singapore Police Force (SPF) - The SPF is the main agency tasked with maintaining law and order in the city-state. Part of the SPF is the Special Operations Command (SOC), a frontline unit grouping together various specialist units into a single strategic reserve of the regular forces to be called upon in any contingency and serious case of public disorder. They will no doubt be the frontline involved in the domestic search and recapture of Mas Selamat.
• Internal Security Department (ISD) - The ISD's mission is to confront and address security threats, including international terrorism, foreign subversion and espionage. The ISD also monitors domestic counterterrorism, international counterterrorism, surveillance, apprehension of suspected militants or terrorists and protection of Singapore's national borders.
• Immigration and Checkpoints Authority (ICA) - The ICA is in charge of the security of the territory of the nation and goods entering the country as well as foreigners entering the country. Conversely, it will also be in charge of preventing escaped terrorists from passing through the checkpoints under its jurisdiction.

3. Deputy Prime Minister Shunmugam Jayakumar is the Coordinating Minister for National Security. The Co-ordinating Minister chairs an inter-ministerial committee comprising the Minister for Foreign Affairs, the Minister for Home Affairs and the Minister for Defence. His responsibility is to oversee counter-terrorism in Singapore, by co-ordinating the NSCS, mentioned above.
4. Minister of Defence Teo Chee Hean is entrusted with overseeing the defence needs of the Republic of Singapore. The Ministry of Defence oversees the Singapore Armed Forces (SAF), of which at least 2 branches are directly involved:

• The SAF Military Police Command is the military police unit of the Singapore Armed Forces, and whose men have been directly involved in the search for Mas Selamat.
• The Singapore Navy will no doubt be tasked with patrolling the shores of Singapore to prevent the escape of Mas Selamat by water.

Conclusions

As you can see, there are direct links between ministerial responsibility and the recapture of Mas Selamat. Netizens, bloggers, MPs and the opposition would do well to focus on these links, rather than to have their attention diverted by the tenuous relationship between the WRDC escape and Wong Kan Seng.

The leadership of Government Singapore is to be truly tested in the coming days.

Let's see how well it holds up.

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Related Posts:
Wong Kan Seng Off the Hook? Not So Fast. The Game Has Just Begun!

Lee Kuan Yew Ain't No Warren Buffett

GIC a few months ago took significant stakes in global banking giants UBS and Citigroup. The share prices of these companies have since taken a tumble due to the impact of the credit crisis, but according to GIC, that's no worry, since GIC has taken these investments with a 'long term view.' In addition to GIC's existing investments in those banks, Lee Kuan Yew, Chairman of GIC and Minister Mentor of Singapore, has gone on the record as saying:

Singapore's GIC may invest in more banks
Reuters, April 30

The Government of Singapore Investment Corp may invest in more banks in Europe and the United States if it gets the chance, adding to its stakes in beleaguered bank UBS and Citigroup, its chairman told Bloomberg TV.

"If there are other banks of the quality of the two that we bought into, with the promise and the capabilities and inherent capabilities to recover, we have got the liquidity to meet it, to make such an investment," Lee, 84, said in a Bloomberg Television interview late yesterday. "We will not rule it out."

"We are buying something that we intend to keep for the next two to three decades and grow with them", he said, adding that GIC was a long-term investor.

After throwing in billions of dollars into credit-crunch battered financial institutions, Lee Kuan Yew is prepared to deploy more capital into this area. Ever confident about GIC's investments, the octogenarian further defended GIC's decisions:

"The franchise of the banks, the expertise that they have, under proper leadership, they will be able to recover and rise again ... Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it." Citigroup, he added, had "an enormous spread worldwide as a retail bank".

Interesting rationale. According to Lee Kuan Yew, UBS and Citigroup have "inherent capabilities to recover" from the credit crisis. Well, this is quite a debatable statement.

Just a few months after GIC's investments, recovery of the banking sector is far from sight. Instead, the banks are scrambling to raise more capital to deal with the damage the credit crunch has dealt them:

Citigroup, Merrill Lead Record Week of Bond Offerings
By Bryan Keogh and Gabrielle Coppola

April 25 (Bloomberg) -- Citigroup Inc. and Merrill Lynch & Co. led $45.3 billion of U.S. corporate bond offerings, the busiest week on record, as financial companies sold debt at the highest yields since April 2001.

Sales compare with $31.2 billion last week and an average this year of $18 billion, according to data compiled by Bloomberg. Citigroup, the biggest U.S. bank by assets, sold $6 billion of hybrid bonds in the company's largest public debt offering, while New York-based securities firm Merrill Lynch raised $9.55 billion by issuing debt and preferred securities.

Bond offerings soared as investors grew more optimistic financial companies can recover from $309 billion of writedowns and credit losses tied to the collapse of the subprime-mortgage market. Banks and securities firms sold 85 percent of investment- grade debt this week, Bloomberg data show. High-yield bond issuance swelled to the most since November.

An inherent ability to recover from the crisis? Not without a lot of additional capital - extra capital which is going to dilute your existing stakes.

The debt issuance is not the end of the story. Citigroup is issuing equity as well:

Citigroup Sells $3 Billion of Stock to Boost Capital
By Bradley Keoun

April 29 (Bloomberg) -- Citigroup Inc., the U.S. bank hit with writedowns on subprime mortgages and bonds, is selling $3 billion of stock two weeks after reporting its second straight quarterly loss.

The shares are being sold in a public offering, New York- based Citigroup said today in a statement. Citigroup already has raised more than $30 billion of capital since December. A weakening U.S. economy and rising consumer delinquencies forced Chief Executive Officer Vikram Pandit to rescind assurances earlier this year that the bank didn't need to raise more funds.

"This was extremely disappointing," William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, said in a Bloomberg Television interview. "We were hoping they wouldn't have to go the equity markets like this."

Citigroup's issuance of equity financing is implicit acknowledgement that it won't be able to deal with the upcoming problems in the credit markets without substantial help. Add to that a weakening US economy and a looming recession, the clouds on the horizon are only getting darker.

Morgan Stanley realised this in its latest research report on the banking sector, painting a very bleak picture of the road ahead. This is in stark contrast to investors (including GIC) who have been calling an end to the banks' credit woes:

Morgan Stanley sees big bank woes just beginning
Monday April 28, By Joseph A. Giannone

NEW YORK (Reuters) - Morgan Stanley analysts on Monday told clients to "sell the rally" in financial stocks, slashing forecasts for big bank earnings and warning that the current credit crunch is only just beginning.

In aggregate, Morgan Stanley reduced its estimates for 2008 large bank earnings by $17 billion, or 26 percent, and reduced 2009 forecasts by $13 billion, or 15 percent. The analysts expect higher loan losses and expenses, offset by higher net interest income, though profits could fall further still if the Federal Reserve stops lowering interest rates.

"More capital hikes and dividend cuts (are) coming as our credit deteriorates and forward earnings decline," analysts led by Betsy Graseck wrote in a report. "We think we are only in the third inning of the credit cycle and expect this credit cycle will be worse than (the slump in) 1990-91."

Just for the record, a baseball game usually has nine(9) innings. Morgan Stanley's declaration that we are only in the third inning of the credit cycle, simply says we're not even a third of the way through the game. A Seeking Alpha contributor has also observed:

The credit markets have improved, in terms of increased liquidity, with the Fed opening up the discount window for investment banks. However, the real economy, which has had only a minimal impact on the financial markets thus far, is deteriorating rapidly. Home prices are continuing to decline, costs of living are continuing to increase (look at the price of oil and food for examples), and the job market is reeling. The real economy will come back around and hit the financial institutions far harder than the freeze in the credit markets did. The Fed put out one fire, but threw gasoline on the other - through massive inflation - and we have not even begun to witness the effects this will have on our economy.

Well, well, it appears Lee Kuan Yew doesn't seem so wise any more. Certainly not as wise as Warren Buffett, whose Berkshire Hathaway has stayed away from picking up stakes in these big banks. And its just as well that we clearly see the difference here, as GIC and Temasek have been repeatedly using slogans to "invest for the long term," to parade themselves as value investors of the Buffett kind.

But Lee Kuan Yew doesn't really understand Warren Buffett. He also said in the interview with Bloomberg:

'[Buffett] has a different view. He has to give returns to his investors year by year. We don't have to. We have to think in terms of the next 10, 20, 30 years. We are buying into something which we intend to keep for the next two, three decades and grow with them.'

But I think anybody who knows Warren Buffett knows that Buffett's favourite investment horizon is forever, and that the investment legend has repeatedly stressed that Berkshire's focus is not on the quarter-to-quarter or year-to-year earnings. In all his writings to shareholders, one can clearly discern that Buffett has his eye on the long term future. Furthermore, Buffett's track record of consistently outperforming the market spans a good 50 years... Thus, for Lee to say the Buffett is narrowly focused on the year-to-year performance of his company, is to demonstrate a gross and fundamental misunderstanding of Buffett's investment philosophy - and thus it was ridiculous for Lee Kuan Yew to claim that GIC has significantly different obligations to its shareholders compared to Berkshire.

Finally, let's not forget Jim Rogers' warning to Singapore's Sovereign Wealth Funds earlier this year:

"It grieves me to see what Singapore is doing. They are going to lose money," he added, referring to investments by Government of Singapore Investment Corp and Temasek in Citigroup, Switzerland's UBS and Merrill Lynch.

I think that just about sums up what is going to happen.

Why the M1 - City Telecom Partnership Is Front Runner for NGNBN OpCo

Singapore's Next-Gen NBN OpCo RFP was released earlier this month. The race is much more open for the OpCo than the NetCo because of the lower barriers to entry and lower capital investments involved. However, despite this, I think that the only bid that truly makes sense for the NGNBN OpCo is the City Telecom - M1 consortium.

1. The operational separation is extremely onerous for the wireline incumbents, and severely dilutes the attractiveness to StarHub and SingTel.

One of the requirements of the OpCo is that it has to be operationally separated from its affiliates. This means that OpCo has to:

• Operate in all respects on a standalone basis, separate from affiliated downstream operating units
• Be located in separate premises
• Independently formulate & make own decisions on its assets and commercial policy
• Not allow its affiliated downstream operating units to have unequal influence on the formulation of commercial policy, and access to commercial information or customer confidential information
• OpCo’s Board of Directors, Management and employees not to have responsibilities in any Affiliated Operator

All these requirements will mean that an incumbent like StarHub and SingTel will have to incur significant duplication of manpower and will have to come up with a different brand name for its OpCo's operations, which might in turn compete with or overlap with its non OpCo operations. In short, Operational Separation significantly restricts their flexibility in the allocation of resources and human talent across the OpCo & RSPs.

A much less onerous option for the wireline incumbents would be to simply set up separate integrated OpCos which would have no such operational separation requirements and which could be a simple extension of existing business units. Such business units would move much faster into the market and be operationally ready.

2. A non-incumbent challenger without any sort of cooperation from existing market players faces significant market and demand risk.

Firstly, a Greenfield entrant into the OpCo space faces a significant degree of risk because his OpCo grant depends largely on meeting adoption targets. Furthermore, the incumbents like SingTel and StarHub could migrate their customer base away from the NBN OpCo to their own OpCos once the five-year exclusivity is over, thereby seeking to kill the NBN OpCo, or thereby severly harming its business case.

Secondly, Bidders with a higher risk outlook will seek to be compensated for this risk with the possibility of higher returns through higher ICO prices. However, the attractiveness of ICO prices is weighted very highly in the evaluation criteria. This puts prospective bidders in a fix. In order to be profitable, the greenfield OpCo will need to win some kind of reasonable margin from his operations. However, he is contrained by the ICO evaluation and regulation plus the fact that the iDA is trying to bring about "attractive ICO prices."

These factors, amongst others, make it highly unattractive for any prospective greenfield bidder with no demand guarantee (e.g. Axia, Zitius etc.)

3. This leaves the M1 - City Telecom (CTI) consortium as the only sensible bid.

A City Telecom - M1 partnership goes a long way in circumnavigating the challenges mentioned above.

Firstly, M1 has a substantial mobile customer base in Singapore, and will be looking towards the NGNBN as an opportunity to provide fixed line services to prevent customer churn and to attract new customers. With a stake in the OpCo, M1 will ensure that its services run over the NBN OpCo, thus significantly enhancing the business case of the OpCo.

Secondly, M1 has no significant wireline operations in Singapore. This means that the operational separation is no where as onerous to M1 as the incumbents. Furthermore, with City Telecom taking a major stake in the OpCo and contributing significant manpower and operational expertise to the OpCo, this greatly relieves the need for M1 to create duplication of manpower - the OpCo business does not cannibalise or compete with M1's current core competencies. In contrast to the incumbents, the Operational Separation requirements are a relative non-issue to M1/CTI.

Conclusions

Neil Montefiore must therefore be an optimistic man. Because for a long time now, SingTel and StarHub have been attacking M1's market share because of the small telco's lack of fixed-line offerings.

I certainly hope Neil realises that he has a very real opportunity here and makes the best of it. Consumers would all benefit from genuine extra competition and from someone who appears to have a genuine understanding of what is really going on.

M1's CEO Neil Montefiore on the Pay TV Market

At last, someone with some knowledge about the Pay TV market says something wise about it in the Singapore newspapers. This time, TODAY carried an interview with M1 CEO Neil Montefiore (unlike My Paper which contained a trashy column by the bungling Lee Sze Yong):

Neil makes the following astute observation:

“I’m not in favour of bidding for content because in the end, it costs the consumer more,” he said. “It seems we’re the only example in the world where you introduce competition and the consumer pays more. It doesn’t seem to be the right model to me. I’m hoping the regulators or the content owners will change that.”

Well, Neil, I too wish the regulators or the content owners would do something about it. But I don't think that's going to happen soon.

• The content owners are too elated that they are able to collect monopoly rent from the Singapore market.
• The regulators are too busy covering their asses to please their political masters.
• And of course SingTel wouldn't care two hoots about the inconvenience caused to consumers - they're a multi-billion dollar company who only cares about how they can break into the Pay TV market in Singapore and make more profits.

This is a simple result of the economics of the bidding model and the monopoly over content rights.

The only realistic chance consumers have is to band together and speak up and make noise through the consumer commission to enact change. Either that or boycott SingTel. It's really up to the consumers to demand and get what they want and stand up for their own consumer rights.

On another note, I think M1 will be the biggest beneficiary in the upcoming next-gen NBN project. In my opinion, an M1 consortium that does not include SingTel and StarHub (i.e. City Telecom & M1) makes the most sense for the OpCo bid. I'll explain why in a later post.

Wong Kan Seng Off the Hook? Not So Fast. The Game Has Just Begun!

I’m sure we’ve all been reading about the report of the COI and the parliamentary session on the Mas Selamat issue. So far, the latest news is that PM Lee has declared that DPM Wong is “not to blame” for the incident.

Singapore PM says top home ministry officials not responsible for terror escape
The Associated Press
Tuesday, April 22, 2008

SINGAPORE: Singapore's prime minister Tuesday voiced support for the city-state's top Home Ministry officials following a government probe that showed several security lapses allowed a top terror suspect to escape a prison.

Speaking in Parliament, Prime Minister Lee Hsien Loong acknowledged that Muslim terror suspect Mas Selamat Kastari's escape from a detention center should never have happened.

"We must admit our mistakes openly and honestly, put them right, and act against those who have been culpable," Lee said.

But Lee said he remained confident in Home Affairs Minister Wong Kan Seng, as well as the top management of Wong's ministry, whom the leader said were not to blame. Wong is also a deputy prime minister.

"I am satisfied that the ministry has taken the correct remedial and disciplinary action, and that the minister and top management were not to blame for what has happened," Lee said.

The Home Ministry oversees the Internal Security Department, which runs the Whitley Road Detention Center where Mas Selamat, like other terror suspects, was being detained without trial.

Well, at least for the time being, it seems that DPM Wong will escape any serious fallout from Mas Selamat’s escape. But it would be jumping the gun to think that this is the end of the story.

AFP has published a news article on this issue, extract below:

Home Affairs Minister Wong Kan Seng told parliament on Monday that security agencies believe Kastari is still in Singapore, the smallest country in Southeast Asia with a population of 4.6 million.

But terrorism expert Clive Williams thinks otherwise, suspecting Kastari is somewhere in the vast archipelago of Indonesia, whose nearest islands are clearly visible from Singapore.

Williams, from the Australian Defence Force Academy, said that for Singapore to maintain Kastari is still in the country only adds to the embarrassment.

"It's been a long time now and I would think that they would've searched every place that he'd likely be in Singapore," Williams told AFP.

"It's not a good reflection on the internal security system, is it?"

He called for an independent review of Singapore's entire terrorism-related security structure.

We are, after all, talking about a manhunt not in the Himalayas, the Arctic icecaps, or the Ural Mountains. We are talking about a manhunt in tiny Singapore. Surely with the amount of manpower and resources deployed to catch the man, you would have thought that we would have caught him by now. Instead, the wily suspected terrorist remains off the radar and has successfully evaded the efforts of the internal security forces and sections of the military to capture him. That one man is capable of such a feat, must be truly embarrassing to the local forces, and the individuals who lead and coordinate them. And don't forget, Wong Kan Seng is the overall man in charge here. Wong will bear ultimate responsibility for a failure to capture Selamat.

And if Mas Selamat has indeed escaped Singapore, then the ICA, the Navy, the police force and other government bodies will have been deemed to have failed in their duties to protect Singapore. And that would be the direct responsibility of DPM Wong, the Minister of Defence, and the Prime Minister himself, whose leadership must surely be questioned (don’t forget, PM Lee was no less than a Brigadier General in the army).

I think Singaporeans should demand a full account of the resources that have been spent to catch Mas Selamat, and inquire as to why the government has yet to capture the JI terrorist. The account should be just as thorough and transparent as the COI report on Mas Selamat's escape.

This issue is just as important, if not more so, than the actual escape from the detention center, for it is in the aftermath of Mas Selamat's escape that the real cost of the mistake is realized. Millions of dollars (if not billions) have been spent, not just on the manpower to catch him, but also the equipment deployed (helicopters etc.). Economic disruption to several businesses that was caused by the massive traffic jams at the causeway also has cost our country millions more. And if Selamat truly makes an escape and manages to engineer a revenge attack on Singapore, the ultimate cost would be quite unimaginable.

The real test of the government's leadership began after Mas Selamat had escaped. And so far, I don't think they've done as well as they should.

The Game Has Only Just Begun!

Why Singapore Will Continue to Slip in Global Tech-Saviness Ranking

The following article appeared in the Straits Times 3 days ago:

April 11, 2008
S'pore drops to 5th place in tech-saviness ranking
By Alfred Siew , Tan Weizhen

FROM being the world's most tech-savvy nation, Singapore has dropped to 5th place.

It fell two notches on the Networked Readiness index, an annual ranking released on Wednesday by the World Economic Forum.

The index, which measures the impact of infocomm policies and usage in 127 economies, ranked Denmark as the most ready to take advantage of technology.

It is followed by Sweden, Switzerland, the United States and Singapore.

This is the lowest Singapore has ranked since topping the chart in 2005. It was second in 2006, and third in 2007.

In this year's ranking, the Republic was top in the quality of math and science education and the Government's vision of infocomm, areas in which it had done well in the past.

But it only scored 15th on the accessibility of digital content, a new indicator measuring whether content is widely available on platforms such as the Internet, mobile phones and cable television.

It was placed 115th for freedom of the press - one notch up from last year - and 99th for expenditure in education, another new indicator.

Dr Irene Mia, an editor of the report and senior economist at the World Economic Forum, said freedom of the press referred to how freely people could share opinions online, and the ranking was based on a survey of top businessmen in 130 countries.

... ...

The NRI ranking discussed above can be found in the World Economic Forum Global Information Technology Report 2007-2008.

I foresee this trend of Singapore slipping down the NRI rankings continuing, for several reasons.

1. Singapore isn't going to accelerate up the metrics of press freedom or accessibility of digital content, anytime soon.

Well, I really don't have to comment much here, do I?

Singapore is notorious for the suppression of political content and opposing opinions in its press, not just of the opposition but also of its own citizens. Reporters Without Borders' gives Singapore an abysmal ranking on its Press Freedom Index, and commentators from around the blogosphere have made comments to the same effect.

Seriously, now that the WEF has added this KPI to the NRI calculation, we're only going to keep falling.

2. Singapore is already far behind the world leaders in terms of broadband speed and pricing.

While world leaders such as Sweden, Korea, Japan and the U.S.A. are charging ahead with speeds up to 100Mbps, Singapore still lags behind with speeds much further behind and prices far higher for the similar quality of broadband speed. Full details found in "Next-Gen Broadband Around the World"

3. The Government is trying too hard to accelerate broadband development, and the efficacy of its plans are not clear.

Much noise has been made about the Infocomm Development Authority's grand plans for Singapore's Next Generation National Broadband Network. The Government is trying to deploy broadband speeds of 100mbps starting from 2010 (which, by then, will probably be far behind the world leaders, who are already testing speeds of up to 1Gbps).

However, unlike many other successful models where the builders of the broadband infrastructure are vertically integrated companies, Singapore is trying to break up the network so that it is operated by several companies. This involves "structural separation" of a NetCo and "operational separation" of an OpCo (these are technical terms and you can find out more here).

For those who do not have the time to find out what these complexities mean, suffice to say that the plans have received criticism from several quarters. For instance, an informed commentator has remarked,

"This effective double layer of separation appears to be the most extreme requirement of any NGN regulatory regime in the world and will likely prove controversial with those in the industry who say that separating out network design from the operator of its electronics is likely to lead to massive inefficiencies and friction."

(see "Singapore's Shock Structural Separation Policy for NGN" and "Singapore's Separation Plan Defies Logic." [Commsday])


4. The incumbent telcos are closely Government-linked, and realistically, we don't expect Lee Hsien Loong's government to hurt Ho Ching's investments.

The Mr Lee is the PM of the Government. The IDA is a department of the Government.

Mdm Ho is the CEO of Temasek Holdings. Temasek has a major stake in SingTel, which holds the monopoly over Singapore's copper access network and has the most to lose if the NGN separation plans are taken to their extreme.

Do we expect PM Lee to hurt his wife in this regard? I seriously don't think so.

Even if the Next-Gen NBN plans come to fruition, politics is going to play a major, major role in hampering the execution of those plans.

Conclusions

Well, we can see that reasons 1, 3 and 4 are political. Indeed, as with many things in Singapore, politics gets in the way of how things develop.

And as far as Tech-Saviness is concerned, I simply don't see how this will change in the near future.