Publication: The Business Times, p 21 Date: 30 December 2010 Headline: Lion infrastructure is the way to go L i o n Infrastructure is the way to go To reach a US$2 trillion GDP in 2065, Singapore must create and build commercial assets with a special quality6 TAN SENG HOCK and propelled the Swiss enterprise to be-Rk E KO011 BOON come the worlds biggest food cornpa. UNDRED- ny, helping the Swiss economy. H FOLD. mats which has 7.8 million people. grow at the breathtak- W e the rate of the European Union. e ing growth of On a per capita basis. Switzerland Singapores hosts about eight times more of the gross domes- worlds 500 largest publicly traded tic product companies than Germany. the re- (GDP). Prom gions biggest economy. USSl billion attrar its independence in Seventeen of the worlds 500 big- 1965 to USS100IbiiIon in 2004 when g s companies am Swiss. amounting et Prime Minister Lee Hsien b o n g took to about one for every 500.000 resi-over the reins f o his predeeassor. rm dents. compared with one for everySonior W s t o r Coh Chok Tong. four million people in Germany. Another tenfold increase in value Thew multibagger Lions in Switzer-creation in the years to 2065 (that is. land are a major asset to the country; 100 years since its independenml- they helped the economy to prosperfrom an estimated USS200 billion by boosting exports. creating job:GDP in 2010 to around US$2 trfUion and spurring consumption.then - and Singapore may well sur- Powerful magnetpass the present level of USS2.2 tril- For Singapore to reach a US$2 tril:lion GDP of the UI(,its former coloni- Uon CDP in 100years since independ-al master. This will likely take place. ence. It must create and build com-particularly as h i a successfully wiz- mercial assets with a "special. quali-es the growth opportunity to be the ty. Like the special Nestles. ~ B B Bglobal leader, in economic and cullw- commercial assets cannot bc takena1 terms. in this century. away or destroyed by foreigners and Consider the case of Procter & become even more valuablu with theGamble (P&G). Founded by English partfclpatlon of multinationaltalwts,storekeeper William Procter and They possess values which arc n dcandle maker James Gamble. P&G determined by the arbitrtnlry fluctu-surged more than hundredfold in lons in the foreign m n c y of anyStage 1"since its incorporation as a one country. such as the US dollar.company in 1890 to S$20 billion in The company assets are also not like 1987. Tbe company found itself in an land values influenced bv foreinnadvanced phase of market maturity demand or reap transieni w l n d hwith Its products and battling on all mins when sold to fonimen at hi&fronts with intensifying competition irices. These are inta&ible ass&from competent rivals. Yet, P&G grew representtng real wealth to sustain aby another tenfold in Stage 2" to cur- nation, not just tangible monetary as-rent S$230 billion. sets which can be brittle. Consider the case of Nestle. The fa- Singapore has been a powerfulmous company grew more than hun- magnet in attracting global capitaldredfold since Franklurt-born pbar- flows and multinational corporationsmacy assistant Heinrich Nestle left . (MNCs) to capital-deepen its econo-his hometown to set up the Nestle R MOm E my. demonstrating exemplary efli-shop in Switzerland in 1866. to 5520 Mission not tmposdbb: Singapore has been a powetful magnet for global capitalJlows and MNCs. VIft can cultivata 20 $100 billion companies and ciency in organising the resources 50 $20-billion uwnpaniss of Don d b r e fn the next 50 years. Q $2 trillion GDP economy may well be achievable and tanPlble infrastructure to executebillion in 1980s. and again by anoth- the strategy. resu~tlng the hundred- iner tenfold. t current SS250 billion. o fold value creation in Stage 1. Most competent -Stage 1 compa- ing of a lion Infrastructure in a busi- billion. This is achieved with the right lnfrasvucture slows down the lone. Frank Leong played an important ness. emotional incentives aligned to en- powerful Hyena entrepreneur; he or role in helping the visionary Fung In Stage 2". we need hundreds ofnies do not cross the chasm to Nestles mom than we need hundreds.Stage 2 because they Iack the Lion In Stage 2". the Lion infrastruc- courage decisive stewardship in the she prefers to continue to capitalise brothers. running the 0% (Operation of billions of US dollars or gold; we -Infrastructure the teamwork. the ture and culture are the sails that de- termino the course, not the wind. process to create lasting cost or de- mand advantage over compotltors. on short-term opportunistic quick gains. The diiculty is often closest at Support Croup) from 1995 until his retirement in 2004. OSG k e e p a data- need the golden goose and not justknowhow, the necessary institutional rely on eggs from other peoples gold.structures and the culture - in order P&C cultivated USS23 billion brands. However. to be able to build up the finishingline;these companies re- base of more than 8.000 factories. en goose.to not only sunrive but also thrive up- while Nestle groomod 27 such brands the enterprise further to S$10 billion main in the lower gears, even risking suppliers and clients around the If Singapore can cultivate 1 0on changes in the marketplace to be- with over US$l billion in sales. These and beyond in Stage 2". sacrifice blowingup. when they are. in fact, at world and uses it to orchestrate the SSIOO billion companies and 50come multibagger Lions. multibagger billion-dollar brands are and stable capital in long-term invest- the tipping point to enter "Stage 2. various members in its network so SSZO-billion companies of such Lion profound sources of vitality to sustain - ments since Stage 1* to build a co- Take the case of the quintessential that they can compete like a pride of calibre In the next half a century, aSustained performance the competitive odge and value rele- hesive t a and a Lion Infrastruc- em supply chain manager and asset-light Lions to generate a greater quantum SS2 trillipn GDP economy may wellThese Lions are akin to the Berbhire vance at P? and Nestle. i& ture, which include governance. oper- business model. Li & Fung. also one of profits for all partners and develop- be achievable.Hathaway. Singapore. Apple and Tbe A company crates value at M e r - ational and financial management of (be best-performingstocks in Hong ers around its core offerings.Capital Group Companies that gener- ent stages of its corporate life cycle. - system are required. Kong. that catapulted nearly hundred- OSG oiled the machinery that ena- The writer is the Gmup CEO and C/O of A d s GMD of Comoanies.ate a sustained and outsized invest- arising from the relentless and eter- Most "Stage 1 companies are con- fold from SS290 d o n to SS28 bll- bled the entrepreneurial leaders in Li a s&t~aporebbs~d inuestrnentment management performance. as nal pursuit of excellence to perfect its tent - and may even display smug- lion since its listing in 1992. Li & & Fungs multiple business units to management organisation sincediscussed in our earlier BT articles on offerings to the marketplace. ness - to conserve the sizeable gains Fung produces SS2O billion in gar- focus on its coro competencies to 2000. Kee Koon Boon is a lecturer ofMay 15 and June 10. Value investors In the context ofAsia, a competant that they have achleved and fail to ments and other goods for the meet the needs of customers and accounting at the Singaporetake delight in understanding what entrepreneur in "Stage 1" may be invest to build an ongoing and lasting worlds top brands and retailers - fighting battles with competitors. Management University andurges and qualifies an entrepreneur able to build his or her business from business. without owning a single factory. growing multibaggars in the process. a director of Aegis Groupto perform acts that lead to the build- a size of under S$100 million to S$l Investing in the team and a Won Ponang. Malaysia-born CFO The Lion Infrastructure at Nestle of CompaniesSource: The Business Times O Singapore Press Holdings Limited. Permission required for reproduction.