The Swedish Vs Asian management styles

This local Swedish article describes how the Swedes manage and lead in their organizations. As mentioned in the article, the Swedish management style is characterized by easy communication, low internal competition and anti-hierarchical organization structures.

Having been spending the last couple of months providing consulting work in a Swedish financial institution, the article pretty much sums up my experiences here. I am not exactly sure if I find their management style appealing. Having spend the earlier part of my life in Singapore, the experience here with the Swedes has been a totally new learning experience.
For one, decisions take ages to be made up, as it is management by consensus, not by pragmatism.
A decision which usually takes the Asian/Singaporean management a week to make would typically take two months for the Swedish management to do the same. In a Swedish organization, all related parties are consulted and if there are disagreements, decisions are postponed to a later date so that both parties can revert with even more information to justify their cases. There is no "ultimate" decision-maker who will preside over the issue, everyone involved is entitled to his/her views and unless everyone is satisfied, the issue will remain unresolved.
The article is also accurate in pointing out that the Swedes usually do plan ahead and try to anticipate all possible scenarios. But then again, there is only so much one can plan, there are some unknown unknowns which will only be made known when as the plan is being implemented.
Low internal competition also meant that there is little incentive for anyone to do better or aim higher than their peers, though on the brighter side, there is less politicking in the office. Personally, I think that part of the reason why internal competition is low is due to the fact that there is little monetary incentive to perform better than your peers.
Compensation in the front offices in financial institutions are typically calculated based upon profit numbers and very heavily performance calibrated. However, for this financial institution, compensation is primarily calibrated on hierarchy or seniority, little incentive for good performance.
I guess this management style is a exemplification of the Swedish society as a whole which places heavy emphasis on social equity.

The Singaporean Worker (vs the French)

Having had the chance to work in a French bank for 5 months alongside the notoriously fun and leisure loving French, it is perhaps only natural that I put forth some observations here.

The French (excluding those snobbish types living in Paris) have a wicked sense of humor - sometimes judged a tad crude or sexual. But one thing is for sure, once they are comfortable with you, they can be ridiculously funny, made even funnier when they try their jokes in English. They are best mixed with a relaxed attitude towards work, and a take-it-easy spirit. Oh yes, and they will try their utmost to include you in their discussions by speaking in English and if they ever break into their native French, they apologise for it. This is truely something I can take back with me.

The generous welfare benefits for the French employee are another stark contrast to what we have in Singapore. A typical employee in a financial institution gets up to 45+10 (compulsory+voluntary) days of annual leave to compensate them for working longer that the stipulated 35 hours a week. The 9+3 months of paid maternity+paternity leave is another feature of the generous welfare given to the French. Not forgetting also the free healthcare and education right up to university levels. The costs of this all? A rather breath-taking tax rate of as high as 45%, not including the various fees, muncipal taxes, etc. And a shrinking (in deficit currently) social benefits pool which could basically mean that current generation may not get to enjoy the full pensions promised to them in retirement. So you gain some, you lose some.

Whilst talking to a group of them over lunch once, I asked what they thought of their equivalent in Singapore. What's said was not surprising at all - their Singaporean counterpart works really hard and long hours and has twice their workload. And I believe, more than likely not paid any more than they are. [There are 1.5 Singaporeans in the team supporting Asia and sometimes NY, compared to 4 French in the team. The Singaporeans who get off work at 10pm SG time will be heartbroken to know that the French office is almost empty by 6pm FR time]

So how do we explain this? Paying a premium for a group of workers who seemingly have less work over another? Perhaps the French are indeed more productive? Perhaps it is a lifestyle thing? Or perhaps it is due to the fact that it is a French bank?

There's an ideal amongst the French and it is that they believe everyone should be entitled to a certain quality and standard of living which from my vantage is quite high (you got to forgive a Singaporean who grew up in a three-room HDB flat and living in the heartlands). So to them, life and time outside work is extremely important and they will not spend more time than what they are paid.

I guess for Singaporeans, like one senior minister once remarked, working hard is something we cannot shake off...

When the underlying assumptions are wrong ...

I read with interest the news from Credit Suisse Group which estimated that 200,000 foreigners will be leaving Singapore.
What are the implications of if such a scenerio happens?
I think of the property developers and the funds which are invested in the property market - this mass exodus of expats will be equivalent of a 'black swan' event. These expats, on average, earns more than most Singaporeans and have a much higher spending power. With their departure, the property market will be missing a critical source of investors.

Touted as Singapore's first hedge fund to venture into property management, this is gonna one helluva ride for their investors if the mass exodus of foreigners happens. Not to mention that this fund has also bought 100 units of a residential development along River Valley, expecting to rent out these apartments when the development is completed in the first quarter of this year. I wonder how many units can be rented out now ...

Is Singapore the new London?

With deflationary pressures in full swing in the UK, it is not difficult to find a pint of beer for less than a pound (approx 2.10 SGD), lunch for a quid and endless clearance sales across all respectable retail chains like John Lewis, House of Fraser, Selfridges, and the list goes on ...
Now, compare this to the article in asiaone: 'Tourists find Singapore pricey' Either Singapore has yet to feel the full brunt of the deflectionary effects or that our economy is just plain resiliant. I doubt it is the latter.

Housing rents and prices have fallen off the cliff as well, especially those apartments near Canary Wharf. With the financial services industry in the doldrums, financial professionals are fleeing the Wharf - here supply outstrips demand. A 2 bedroom flat in Canary wharf, overlooking the River Thames cost about 360 pounds a week (about 3000 SGD a month). Now compare that to a two bed apartment in the Sail@Marina which costs about 5000 SGD a month upwards.

So, is London more expensive or is Singapore the new London?

I got a earful from property owners when trying to negotiate rent when I was back in Singapore last month...hopefully the market will now manage their expectations and they will be willing to accept a lower rent when I return ..

Bottom in Singapore Housing still Far Off

The modus operandi of a slowdown as evident in the US and UK is as follows:

Equity Markets Collapse - Real Economy Slowdown (evident in drop in corporate profits) - Spike in Unemployment - Drop in Real Estate prices.

In Singapore, I think we are still in the second phase (real economy slowdown). The next shoe to drop is the employment rate. The Singapore government is pulling out all stops to prevent the unemployment rate from increasing. It remains to be seen if the measures work. Expect to see Singapore's unemployment rate to at least match that in the 2002 - 2004 slowdown.

The adjustments to real estate prices will follow but these adjustments will take time to work through. Real estate prices are usually 'sticky' primarily due to the fact that price discovery is usually delayed and information is not as readily available as exhibited in the equity markets. In addition, expectations of market participants in the real estate market are managed by estate agents who has every incentive to push prices up. Globally investors now have a slew of properties to chose from - London and New York property prices have dropped significantly (approx > 40% at SGD prices) - can Singapore still attract these investors?

Singapore will be one of 10 slowest growing economy in 2009

According to the Economist Intelligence Unit, Singapore will see it's economy shrink by 2% next year, making it one of the top 10 slowest growing economy in 2009.
Much of it, I believe is due to our reliance on exports to the US and Europe which will be facing even greater recessionary pressures next year.

Temasek - A closed-end sovereign wealth fund?

Was just reading Temasek Holdings annual report for year ending March 2008. A couple of notable insights into the workings of this investment vehicle whose sole shareholder is the MOF (Ministry of Finance):

a. It's becoming harder and harder to make money - first time in five years where Temasek had a negative wealth added figure (Wealth added is a benchmark which measures the return against cost of capital) Bearing in mind that as the portfolio value increases, the absolute cost of capital increases as well, so Temasek has to make even more money in order to beat this benchmark.

b. Divestment out of 'emerging' Asia into 'stable' Europe. Guess the Asian economies are looking a tad forthy?

c. MOF does not inject capital regularly but instead on an ad-hoc basis. I wonder if Temasek allows any withdrawal of funds by MOF? From the report, it seems that MOF has never drawn-down any funds from Temasek so it could imply that the capital injections by MOF are excess funds after paying down CPF, pensions, dividends?

d. Would Temasek be better off paying a bigger dividend (to Singaporeans) if there are no worth-while investments, rather than chasing investments which on hindsight look a bit too expensive at the current climate?

The investment report is definitely worth a read - especially if you want some insight on Temasek's investment strategies, based upon value investing principles.

Temasek has learnt its lesson well

Diving into the details of the latest Merrill Lynch cash call, it is definitely a 'sweet' deal for Temasek. Temasek has learnt its lesson well since their Barclays intervention.
However, couple of things to note:
a. The 'reset' clause will no longer allow going forward; ie if there are further cash calls, Temasek will no longer be able to exercise the right to purchase more stocks at the new issued price
b. There may be more cash calls for ML going forward, looking at their current risky debt holdings

Hopefully, this will buy more time for ML to unload their risky debt at a better price.

Singapore bum investment decisions

Here's a not-so-flattering take by the ft on the investment decisions undertaken by some of the Singapore companies.
Ouch...

The cost of the appreciating SGD

The SG dollar has strengthen against every other reserve currency since the start of 2004.

There was a report by the New York Federal Reserve in 2004 which quantified that for every 10 percent appreciation of the Singapore dollar against the U.S. dollar and other reserve currencies would result in a domestic currency capital loss of more than 10 percent of GDP.

Looking at the charts above, since the start of 2004, the SGD has appreciated more than 15% against the USD, more than 10% against JPY and GBP and remained unchanged against the EUR.

Given Singapore's GDP of about 140 bn SGD in 2006, these currency fluctuations would mean a loss of about 14bn SGD ... wow ... which may explain GIC's and Temasek's interest in the US banks - better to hold their stocks than to hold the USD.

Singapore is Tops again - in terms of Pay

Article on the earnings of the top world leaders. Singapore is tops again - enuff said.

The Union Bank of Singapore

The Singapore Investment fund (GIC) was reported to have invested 11 bn CHf in convertible notes in UBS. The terms of the deal are as follows:

a. Convertible note with 9% interest payment
b. Maturity period of 2 years
c. Upon maturity, if stock price lower or equal to 51.50 Chf, convert @ price = 51.50, Approx 213.6 million shares, equating a 10% stake
d. Upon maturity, if stock price higher or equal to 73.60 Chf, convert @ price = 73.60, Approx 149.5 million share, equating a 7% stake
e. If upon maturity, price is between 51.5 and 73.6, strike will equal price

Kinda like buying a call option strike at 73.6 + selling a put option strike at 51.5 with maturity 2 years.

What it means,

1. Great positive publicity for sovereign funds - providing a much needed source of liquidity and shedding the 'barbarians at the gate' image
2. Positive signalling effect for investors with investment horizon greater than 2 years for financial stocks
3. Dilution effect for existing shareholders - looks like some investors will not be pleased, expect to see some defensive moves from the board and the chief executive

Going forward,

Expect more capital injections to the investment banks as the credit turmoil continues with the liquidity coming from the Middle East, China and countries with huge foreign reserves.
A further depreciation of the US dollar if these sovereign funds liqiudate their holdings in US treasuries to fund their investments (if investments are to be paid in currencies other than USD)

Condolences to a fellow Singaporean rower

I am deeply sadden to hear the news about the sudden passing our five Singapore dragonboat rowers in Cambodia, My thoughts are with their families during this difficult time. I am still in a state of shock as I type this entry.

Stephen Loh was a member of the Singapore national team since 1999 and I had fond memories rowing with him when I was still part of the Singapore team. He was a great team mate to have around, always dependable and was one of the fittest member in the squad. He has got a great personality and his smile and kind words never fail to lift my spirits after a tough workout.

I will miss him greatly.

Will we ever have this in the Singapore Parliament?

Check out the exchange between Gordon Brown (the current UK PM) and David Cameron (the opposition leader).

'He's demonstrating no common sense at all. Would they see a Prime Minister who trys to control everything but actually can't run antyhing.' - David Cameron addressing Gordon Brown.

Gordon Brown's government is under tremendous pressure these couple of days due to the many failings which happened lately - the loss of 25 million UK citizens' bank data, the handling of the Northern Rock fiasco did not help the Labour party any bit.

I am impressed by the quality of the exchange - something I dont forsee taking place in Singapore at least for the next decade

What happens in a market where there are no buyers??

If a tree falls in a forest and no one is around to hear it, does it make a sound?
If there are no buyers in a market, will there be any prices?
We have not seen the end of the credit turmoil - check out the the interesting comments given by the CFO of Citi - some of his comments border on desperation and pure absurdity.
'No market to hedge CDO book' , 'No observable prices to judge prices', Citi is really in deep deep trouble here.
I am quite skeptical about our local banks as well - they did report holdings of CDOs on their books in August but Singapore accounting rules do not require them to mark these positions to market/model since these CDOs are held-to-maturity. The question is, if the underlying securities are marked down in ratings or have a higher risk of default, the cash flows from these CDOs will no longer be guaranteed. Expect more volatility ahead.

Teachers to be trained to teach Financial Literacy

So, NIE is going to train 500 teachers to teach Financial Literacy over the next 18 months.

NIE is partnering with Citi Foundation to 'build a framework that provides a comprehensive and structured nationwide teacher development education programme to equip teachers in schools with the financial literacy skills,' said an NIE statement.

Prof Lee Sing Kong, Director of NIE said: 'First, we provide teachers with basic financial literacy skills of managing their own finances and thereafter, pedagogical training to empower them with engaging pedagogy to reach out to their students. Equipped with resources and engaging pedagogy for the teaching and learning of financial literacy in a fun and meaningful way, the teachers can apply the financial literacy principles in classroom teaching and enrichment activities for students.'

#interpretation# I think NIE better start paying these teachers a better salary in the event that these teachers decide to make a career change. hahaha...
Financial Literacy is defined in wiki as 'the ability of individuals to make appropriate decisions in managing their personal finances'. Wow. That's a lot of knowledge to impart in order for anyone to make 'appropriate' decisions.

Mr Piyush Gupta, Head of Asean, Markets and Banking and Citi County Officer, Singapore, said it is important to give children a head-start in the disciplines of financial budgeting, planning and investing, to help them better understand how to use financial resources available to meet their goals in life.

#interpretation# I am not too comfortable when financial institutions tie up to 'impart' knowledge to impressionable young people. These institutions earn fat margins on selling exotic and complex financial products - what other better ways to sell these financial products of mass destruction than to teach people how to buy them ...

SORA rates driven by Fed's liquidity machine

The US Federal Reserve has pumped $25.5 billion in liquidity into the financial system so far this week, raising concerns of continued troubles in short-term funding markets.
The central bank released $8.5 billion in cash on Tuesday and $6.5 billion on Wednesday. The intervention came after the Fed pumped out $10.5 billion on Monday.
And look what happens to the SORA! (Singapore Overnight Rate Average). Singapore's soaking up all the liquidity. The possible explanation is this:

a. Singapore banks buys USD using SGD (last three days USD/SGD spiked up to 1.466 compared to the current 1.458)
b. MAS funds the SG banks SGD borrowings at lower rate to soak up the USD (lower SORA)

;-) a good way to profit if you know when the Fed is going to pump out more USD ...

MAS in Inflation fighting mode

Wow, seems that MAS has began inflation fighting in Singapore. SGD is appreciating across all major currencies as at today.

USD is down almost 4% YTD
EUR is up 3% YTD, falling from a peak of 5%
JPY is down 3% YTD

If viewed at a one-month's window, all currencies are down against the SGD except for the kiwi. So you can almost guess who our major trading partners are ...

Life is about Trade-offs?

On my previous trip back home, I had the pleasure of meeting up with a former lecturer in NUS who is now working at an investment bank as an educator. He was sharing with me about his thoughts on decision-making in life and how we actively seek to find a better alternative to our current status.
I didn't think too much about it till I went for an afternoon run today; my thoughts drifted and I started comparing the trade-offs coming here to London from Singapore.
Some trade-offs are easy to quantify: Taking a swim in an Olympic-sized outdoor pool under the nestling morning sun for SGD1 Vs Bumping into bodies in a quarter Olympic-sized heated indoor pool for GBP4. Singapore public pools wins hands down.
Other trade-offs are slightly difficult to quantify: Lying in Hyde Park under the warm summer sun and a cool nice breeze, watching stage one of the Tour de France. Taking nice long runs in the cool dry minty weather, allowing me to stay fresh and dry throughout the run. London doesn't feel so bad after all ..
However, there are some trade-offs which I can never put a price on: Watching my baby nephew grow up, the family dinners, having mum's hands around my shoulder when I am back home late at night for dinner..
Well I guess it is tough trying to work out which alternative is better and as I struggled up a long hard upslope, it suddenly came to me - there is no point trying to make sense of what I have missed out on, instead, focus on the present and make the best out of whatever decisions that I have made. With that, I gasped another mouthful of air and reached the top of that favourite spot of mine in Hampstead Heath.

Interview of Mr Lee Kuan Yew with the IHT

I am not exactly sure when it began, but as I grew older, I am starting, more and more, to appreciate and admire MM Lee Kuan Yew's leadership in carving out a successful city state in an unstable and convulsing Southeast Asia. The underlying ideology for the Singapore political party as MM Lee remarked in his interview with IHT is driven by a pragmatic purpose - to make this place better and make it work. His interview with the IHT is definitely worth a read.