Minds And Mindsets: The Civil Servant And The Businessman

aka Chronic Worrier, adapted and printed by The Straits Times  11 May 2005

SPEECH BY MR NGIAM TONG DOW AT THE PONTIAC LAND-IPS

THOUGHT LEADERS LUNCH HELD ON 10 MAY 2005

AT THE SUMMER PALACE RESTAURANT, THE REGENT, SINGAPORE

____________________________________________________________

I was a career civil servant until my retirement in 1999. Spanning 40 years, I have served in the economic ministries of Finance, Trade and Industry, Communications, National Development, and PMO. I was also Chairman of the Economic Development Board (EDB), the Development Bank of Singapore (DBS), and Housing and Development Board (HDB).

More than my colleagues in non-economic ministries, I had greater contact with businessmen and entrepreneurs in the private sector.

Civil servants and businessmen may look at the same set of facts or data, yet draw different conclusions. When looking at a half empty glass of water, the civil servant looks at the half which is empty, and concludes that there is a gap. A businessman will see the half filled with water and concludes that there is an opportunity.

The difference in perception is because of the difference in their mindsets. The calculus of the civil servant is cost and benefit analysis, taught in schools of public administration. The abacus of the businessman is profit and loss, taught in business schools. Why? My guess is that the civil servant and the businessman march to different drumbeats. The public sector strives to produce goods and services at the lowest possible cost so that the most number of people can afford them. Quality is consistent, but dull. There is no product differentiation.

HDB Look

As Chairman of the HDB, I showed a group of private developers from the Real Estate Development Association of Singapore (REDAS) round three blocks of newly completed design and build flats at Jurong West. The intention was to sell them en bloc to private developers for conversion into private apartments with condominium facilities.

The President of REDAS, an old friend from DBS Land, took one look at the newly built flats and told me that my proposal will not fly because the flats had the “HDB look”!

I was very upset because these flats, under our design and build schemes, were actually designed by private architects.

While the honour of our own HDB architects was saved for the day, I could not understand why HDB flats designed by private architects should have the same look and feel of HDB flats designed by our own architects. Why is there no product differentiation?

On returning to the office, HDB management patiently explained to me that the look of privately or publicly designed HDB flats has to be similar because HDB or private architects have to design to the same set of cost parameters.  Which is another way of saying that HDB flats have to be “affordable”.

To be honest, I am not totally convinced by HDB management’s rationale. On becoming Chairman of HDB, I found it hard to accept that HDB flats built on prime sites still wear the same HDB look.

Well, the acid test will soon come with the introduction of HDB’s Design, Build and Sell (DBS) schemes. Under the new DBS, the successful tenderer for HDB sites will design, build and sell at prices the developer sets for itself.

The HDB will not set the selling prices. This liberalisation is to be welcomed. I hope the stage will be reached when HDB developers can sell to all Singapore citizens, and not be confined to citizens who qualify under the household income ceilings, which is currently set at $8,000 a month.

“The Best Advice I Ever Got”

The March 28, 2005, issue of Fortune Magazine featured the affable genial face of Mr Warren Buffet on its front cover. The lead story was entitled, “The Best Advice I Ever Got” – advice received, not given, by Warren Buffet, Jack Welch, Richard Branson, Peter Drucker, Meg Whitman, Andy Grove, Vivek Paul, and 21 other business superstars.

 

Their personalities are as far apart as the north and south pole. Compare Buffet with Branson. Reading between the lines, one common quality shines through. That is, all these outstanding business leaders listen more than they talk. They take to heart advice given by their fathers, their bosses, their spouses, friends, and peers. But, they make up their own mind. They are leaders, not followers.

Our Very Own Business Leaders

In my civil service career, I was privileged to know and to enjoy the friendship of seven outstanding business leaders. Though none of them has a doctorate degree, they are men with sharp intellects. They value education and have given generously of their wealth and their time to our schools, polytechnics and universities. What makes them stand out is their immense energy.

They are always on the go, prowling and pouncing on business opportunities. You could say that they have the energy of the great cats of the animal kingdom. They are however not predators. They run businesses that do not exploit human weaknesses.

I have the greatest respect for them, more so that I am a member of the Singapore Administrative Service, identified as a priesthood by Dr Goh Keng Swee, a great Public Servant.

These outstanding leaders of business are:

Mr Kuok Hock Nien of Shangri-la Hotels – “Nothing but the Best”, on building Shangri-la’s first flagship hotel in Singapore.

Mr  Robin  Loh  of Robin Shipyard – “Get the Business First”, on building his first Oil Rig.

Mr Brian Chang of Promet – “Build a Circle Line”, on the MRT.

Mr Kwek Hong Png  of Hong Leong – “Just Follow the HDB”, on building up a land bank.

Mr Lien Ying Chow - “Enjoy your Birds’ Nest”, before the Chinese do.

Mr Teo Soo Chuan - “Luke Warm Water is Best”, on Indonesian Trade.

Mr Goh Tjoei Kok  - on Intraco doing Chinese business on expat salaries.

I will now recollect the conversations I had with them. Though I was a younger man not only in years but in wisdom, they took me into their confidence and gave me very sound advice on business and on life, which I shall now recall and recount.

 

Kuok Hock Nien of Shangri-la Hotels – “Nothing but the Best”, on building Shangri-la’s first flagship hotel in Singapore

My first conversation was with Mr Robert Kuok in the early 1960’s when he and a group of fellow rice and sugar traders decided to enter an entirely new business, owning and operating hotels. They had bought a large piece of land in the then largely residential Orange Grove Road.

Mr Kuok came in to see me, then a young wet behind the ears officer, in the Ministry of Finance at Fullerton Building.

I asked Mr Kuok what type of hotel he proposed to build. He told me his group was considering to build a super luxury 5-star hotel. As visitor arrivals were only around 400,000 compared with our current 8,000,000, I demurred and wondered whether they should reduce their risk by building a more modest hotel.

Mr Kuok laughed and told me that though the visitor arrivals were relatively low, those who arrived at our shores were likely to be people of means and substance, and would want nothing but the best. That was the basis for building the first Shangri-la flagship hotel in Singapore. Fortunately, the right strategic decision was made by the businessman, not by the civil servant in me.

Robin Loh and Robin Shipyard – “Get the Business First”, on building his first Oil Rig

In the mid-1970’s, I was excited when I read in the morning papers that Robin Shipyard had won a contract from the PRC to build two oil rigs. As Chairman EDB, I was wondering how Mr Robin Loh, who had never built oil rigs before, could clinch a contract to build not one, but two, oil rigs. I was concerned that Robin Shipyard might not be able to deliver, putting Singapore’s reputation at risk. So, I invited Robin in for a chat.

When I popped the burning question, Robin looked at me exasperated. He told me that as a businessman, he has to get the business first and worry about how to do it later. He pointed out to me that as a civil servant I would worry how to do the business for so long that we end up missing the boat. With the contract in hand, Robin hired an American naval architect in Los Angeles to design the rigs. The rigs were built in Singapore under Chinese supervision! His advice to wanabee entrepreneurs is always, “To get the business first.”

Brian Chang of Promet – “Build a Circle Line”, on the MRT

Mr  Brian  Chang  hails from South Africa and after graduating in mechanical engineering from the Imperial College in London came to Singapore in the late 1960’s hoping to work for EDB. Fortunately for Brian,

Hwang Peng Yuan who interviewed him turned him down as “he was too good for EDB”, in PY’s words. Brian went on to establish the Promet Shipyard and became an outstanding entrepreneur.

He rang me up one morning when I was PS (Communications), in the midst of planning and battling the Ministry of Finance to build the MRT.

He had seen the proposed route configuration in the morning papers, and told me that it was all wrong. He said that an east-west/north-south configuration would only serve to carry traffic into the city in the morning and out of it in the evening. Only half the capacity would be used in the morning and in the evening. There would be little traffic in between the morning and evening peaks. Brian urged me to go for a circle line. Conceptually, a circular configuration would carry traffic through the day. Instead, we configured the routes by linking up HDB new towns already built in a north-south east-west direction.

Incidentally, Dr Goh Keng Swee made the same point in a different way. He said that it was too expensive to build rail systems just to carry the morning and evening peaks. He thought it better to develop bus routes, which are more flexible. As he puts it, when mistakes are made the marginal cost is only the cost of the last bus. The rail system requires putting $5 billion at risk.

Both Dr Goh and Brian Chang are right in their own way. Having built the MRT, Singaporeans are now more mobile and can access almost every part of Singapore by rail, or bus. Singapore is now a more livable city. Property values have moved up.

In the great MRT debate, I was for building the MRT, as higher property tax revenue would pay for the full capital cost. As PS (Finance), my main concern was that fares should be set at levels enough to pay the full operating costs and provide for depreciation. I hope the Public Transport Council would take this to heart in deciding on fare increases.

Kwek Hong Png of Hong Leong – “Just Follow the HDB”, on building up a land bank

Mr  Kwek  Hong  Png,  who  built  a  property  empire  out  of  a hardware business, speaks only Hokkien. Though my own Hokkien is elementary, I decided one day to ask him about his business strategy in building up a land bank for Hong Leong.

He looked me straight in the eye and told me that he adopted a very simple strategy. He said that whenever and wherever the HDB acquired land for building new towns, he would buy whatever odd lots that the HDB left behind. The zoning did not matter.

Mr Kwek figured out that if the Chief Planner allowed change of use from, say, rural green zone to suburban residential for HDB acquired land, by the same token the Chief Planner would have to allow change of use for privately acquired land in the vicinity. Mr Kwek was a shrewd businessman who understood the mindset of the civil servant.

What the civil servant failed to see was that when the HDB acquired the bulk of the rural land, whatever remained in the private domain was scarce, and therefore more valuable. It was public policy that created private scarcity and value for shrewd entrepreneurs, such as Kwek Hong Png of Hong Leong.

Mr Lien Ying Chow – “Enjoy your Birds’ Nest”, before the Chinese do

Mr Lien Ying Chow was a man of boundless energy and tenacity. He established a fledgling Overseas Union Bank in war torn China and moved it back home to Singapore when the Second World War ended. He had very high EQ, and built OUB to be one of the Big Four banks in Singapore.

I recall a conversation with Mr Lien at a National Day reception held in the Singapore Conference Hall in the late 1970’s, well before China became an economic powerhouse.

He believed in birds’ nest as a health tonic and advised me to enjoy birds’ nest before, as he puts it, the Chinese price us Singaporeans out of the market. Mr Lien was very prescient. Today, a tahil of birds’ nest is worth more than its weight in gold.

Today, China is an economic competitor of economies much larger than ourselves. On looking back, Mr Lien in his inimitable way gave me a lesson in global competition that no amount of statistics can ever convey.

Teo Soo Chuan – “Luke Warm Water is Best”, on Indonesian Trade

Mr Teo Soo Chuan, as the eldest son, heads See Hoy Chan the company founded by his father Dato Teo Hong Sam. See Hoy Chan is one of Singapore’s leading rice and sugar traders in Carpenter Street. Soon after General Suharto came to power as the President of Indonesia, he sent a message to Singapore asking whether our Government could send 10,000 tons of rice to a province in Indonesia on the verge of starvation. Dr Goh, who was our Finance Minister, decided that we would do so as a good neighbour. There was no need to enter into any memorandum of understanding. See Hoy Chan shipped the rice on our account.

It was a human response to a neighbour’s request for help. This gesture of goodwill on the part of Singapore paid handsome dividends in our relationship with Indonesia under the stewardship of President Suharto. For the record, Indonesia returned the 10,000 tons of rice to Singapore some years later. Teo Soo Chuan told me that the rice returned was of a higher quality than the rice we gave.

Out of this relatively unknown episode, Mr Teo told me that, in dealing with Indonesia, the best water temperature for Singapore is lukewarm. If the water is too cold, ie Indonesia is as efficient as ourselves, there will be no role for Singapore. Neither should the water be too hot, ie Indonesia descends into chaos. If the water is too hot, Singapore would be boiled in it.

Teo Soo Chuan sums up in a nutshell what could be our MFA’s policy on Indonesia.

Goh Tjoei Kok – On Intraco doing Chinese business on expat Cost

Mr Goh Tjoei Kok came to Singapore from Djambi, Sumatra, in the 1950’s. His Tat Lee Company is a major rubber and palm oil trader with plantations both in Indonesia and Malaysia. He and his business partners established Singapore’s first steel re-rolling mill. The National Iron and Steel Mills (NISM) produced steel bars from ship scrap for Singapore’s HDB housing programme.

I got to know Mr Goh well when he became the non-executive Chairman of Intraco Limited. Set up by Dr Goh, our hope was to grow the company into a trading conglomerate.

Alas, we got off on a wrong footing. Mr Goh was a quiet man who seldom had harsh words for anyone, least of all a civil servant. But one day, he asked to see me urgently and told me bluntly that Intraco would never succeed because, in his words “the company’s management was earning expatriate salary and doing small Chinese business.” In today’s idiom, Mr Goh implied that while we expected to enjoy world class pay, we were not delivering world class performance.

As Singaporeans aspire for world class lifestyles, we need to remember that we have to deliver world class performance.

Dr Goh Keng Swee and Bird Seed

Dr Goh Keng Swee was Singapore’s first Finance Minister. According to Professor Silcock, who taught economics to Dr Goh in Raffles College, and myself at the University of Malaya, Dr Goh was the best economics mind he had taught.

As Defence Minister, he established what is now the cluster of defence industries grouped under ST Engineering. He did it without purchase of prohibitively costly technology. He adopted what he called reverse engineering, which was the process of engineering backwards from the final product to the parts and components. Reverse engineering is the approach of the public service manager faced with resource constraints.

A more vivid example of this cost conscious mindset is embodied in his decision to build the Jurong Bird Park first, rather than the zoo. On our return journey from the IMF/World Bank meetings in Washington in September 1968, Dr Goh asked me to draft a project paper to set up a bird park in Singapore.

When I asked him why not a zoo, he gruffly replied that birds only eat bird seeds, which is a fraction of the cost of meat to feed carnivorous animals at a zoo. For the record, Dr Goh approved the setting up of the Zoological Gardens later. In reality, both the bird park and the zoo have to be subsidised by the Ministry of Finance.

To sum up, the businessman wears a demand side mindset always striving to sell at the highest possible price. The civil servant, on the other hand, works on the supply side to provide a service or a product at the lowest possible cost.

 

The civil servant, not being attuned to the market as well as the businessman, often has to sell below cost incurring subsidies at public expense. Of course, the businessman incurs a loss when he guesses wrongly. The civil servant is rewarded for output. The businessman is rewarded for the outcome, which is profit.

What Keeps Me Awake At Night

Chang Li Lin’s letter of invitation for me to speak to you today requires me “to speak for about 10 to 15 minutes on the ideas that I am grappling with at the moment.”  In plain English, what  keeps  me  awake  at night? Having served as Chairman of the Economic Development Board in the 1970’s, from 1975 to 1981, I have become a chronic worrier on the state of health of the Singapore economy.

The front page of the International Herald Tribune of August 12, carried an article with the compelling and provocative headline: Singapore’s economy: Has it passed its peak? Country struggles to sustain its growth.”

The IHT journalist raised the right question. I was however disappointed that the body of the article was more political rhetoric than economic substance. The heading will serve us Singaporeans well as a wake up call.  I will re-phrase the headline as: Can Singapore Survive? As a true blue Singaporean, I would say that it is not in our nature to accept preordained fate. If we have to die, we will go down fighting.

The recent economic history of Singapore is a part of most of us born before 1959. When the PAP Government first assumed power that fateful year, it inherited a stagnant entrepot economy with an unemployment rate exceeding 10%. There was a small educated group literate only in English, but largely without any technical skills. Singaporeans were mostly clerks, teachers, nurses, personal drivers, and amahs.

Hong Kong

As a young EDB officer, I recall visiting Hongkong with Mr Lien Ying Chow and Mr Eric Meyer (from Israel), the first EDB director. We called on a Teochew entrepreneur who manufactured metal stampings for alarm clocks. We tried to interest him in setting up shop in Singapore. He turned us down in a condescending way, saying that Singaporeans, who are just small traders, could never manufacture consumer products such as clocks. At the time he was right.

Industrial Training

It drove us in EDB to promote industrial training. Fortunately for Singapore, we were able to attract to Singapore pragmatic multinational companies, such as Philips of Holland, Rollei of Germany, Seiko of Japan, to establish joint industrial training centers with EDB, to turn young school leavers into skilled technicians.

Dr Pannenberg

Dr Pannenberg from Philips was our first Science and Technology Advisor. He told us that basic research was not an option for Singapore. Instead, he urged us to raise our level of competence in science and technology. Dr Pannengberg was confident that if there are competent engineers and scientists in Singapore, we would be able to attract high technology MNCs to establish manufacturing plants here. EDB therefore pushed for the expansion of engineering enrollment in what is now NUS, and enthusiastically supported the metamorphosis of Nanyang University into the Nanyang Technological Institute.

A*Star, our agency for Science, Technology and Research, ably led by Mr Phillip Yeo, co-Chairman of EDB, is basically following the game plan laid by Dr Pannenberg nearly three decades ago. This is to raise the level of competence of our engineers and scientists.

NUS, NTU and SMU

Our three universities, NUS, NTU and SMU, have added IT and soft skills necessary for Singapore to compete in finance, banking, publishing and advertising, and other media services. In essence, our investment in education is to acquire the knowledge which we can use to leverage on the greater resource base of land, labour and capital of our neighbours and trading partners.

As I have expounded elsewhere, Singapore has to find a niche in the economic pyramid of every other country. Because of our limitation of size and talent, we can never achieve an integrated self-contained economic pyramid on our own. In fact no country can, in today’s world of a global economy.

I believe that we can leverage on our expertise and experience in  fields  such  as  ship   repair,   port   management,   housing   and   township development,  transportation  and  logistics,  education  and  health  services,  IT networks, retail banking, and other new emerging service sectors.

Our  strength  in  oil   refining   and   petrochemicals,   advanced electronics, pharmaceuticals, can be exported to other countries with greater resources to help establish industrial clusters or hubs in countries such as China and India. Knowledge is a platform for win-win cooperation.

The old mindset of a zero sum game in competition is obsolete.

What our competitors cannot take away from us is good government.

Finally, Singapore should never opt for quick fixes, such as a casino resort in whatever form or name. We have not done so in the past.

Today, Singapore is a far stronger economy and healthier society than say Macau.

Instincts and Foresight

In facing the future, our current generation of political and business leaders will do well to learn from the instincts, foresight, and grit, of our pioneering business and political leaders. Who could have imagined that from a single hotel in Singapore, Mr Robert Kuok and his business partners could have gone on to establish a global chain of Shangri-la hotels?

——–

Source: http://gavinseng.files.wordpress.com/2006/06/ngiam%20tong%20dow%20-%20civil%20servants%20vs%20businessmen.pdf

Posted in Ngiam Tong Dow Articles

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My favourite quote today

"I am afraid the cruise ship is over capacity limit, and it used to be a luxury cruise ship. The designer’s claim that it is not sinkable, the name is Titanic. There are not enough life boats, no preparation or provision for failure. Thank you Mr Goh for reminding us." - Low Thia Khiang

"Till today, I am still puzzled by why the PAP cannot fight a fair election without gerrymandering, abusing the GRC system, basically, making sure they enter into a boxing ring with an opponent who is expected to fight them with hands tied behind the back. There is a reason why bullies are not popular in schools. Why not be the school prefect?" - Alvinology

"The question to ask is what lies at the root of the discontent or the disengagement between the G and the people. I am going to stick my neck out and say that it is ministerial salaries. I consider it the root of all evil. Serious. It reduces what should be a social compact into a business contract. " - Bertha Henson