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Se State Capitalism

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Submitted By ikkakuju
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State Capitalism through the Government-Linked Corporations (GLCs) has played an important role in the development and growth experience of Singapore in the past for decades. How have Singaporeans benefited from GLCs? Should Singapore continue with this industrial policy? What are the challenges ahead, if any?
Benefits
* Strategic benefits having the government as LT shareholder/anchor shareholder * Being a GLC is rewarded in the financial markets with a premium of about 20% * Helps in facilitation of industrializing and creating local champions in certain industries * When venturing overseas, GLCs benefit from the ‘Singapore’ brand name, while in turn helping to strengthen it (and build economic relations with other countries) * Keppel (a GLC) have captured commanding market shares (70% of the world jack-up oil rig design-and-build market * Singapore Airlines, DBS Bank, and Keppel Corporation, which have been run on a commercial and competitive basis despite the government ties, and have succeeded not just domestically but regionally and globally

Should Singapore continue? * Government-involvement is too heavy * The IMF cautioned against creating more GLCs or expanding existing ones as that would dilute the benefits * Overall highly-scrutinized by shareholders; an indication that Singapore companies are top-tier companies that adhere to stricter best practices * LCs often compete against each other in key markets, making entry by an independently-held company difficult. For example, SingTel and Starhub, both Temasek Holdings companies, compete directly in the wireless service market and will soon do the same in the cable television market * GLCs are primarily established to catalyze the industralisation process and expand into all areas of the economy * The job-provider: recruit staff home and abroad *

Challenges * Economic growth has slowed in recent years, making Singapore lose some of its competitiveness * Lack of transparency in annual reports and financial figures * GLCs not only involved in strategically important industries; hence making it difficult for private entrepreneurship to flourish * Hindrance in terms of overseas expansion * Perform worse than private sector companies because “their managers are mainly civil servants who lack business acumen” * Unintentionally ‘crowd out’ national economic development * SMEs find it hard to compete with GLCs as GLCs have better sources of funding, contacts and are in a favored position when it comes to govt contracts * GLCs tend to be large (take Temasek for instance) and are able to exploit monopoly power, exploit economies of scale and scope, are more profitable because they are less likely to go bankrupt *…...

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