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Tuesday, 21 December 2021
Season's greetings from tropical Singapore!
Tuesday, 23 February 2021
Military coups just aren’t what they used to be!
In the good old days the military simply had to secure key sites like the radio, television broadcasters, airports, other transport hubs and newspaper offices. Once the sites were under control, then detain the ‘disputed’ head of government along with her key associates. Finally, put some helmeted soldiers decked out in combat gear on the streets of major cities, preferably with some tanks nearby for the ‘wow’ factor. The civil service and judiciary naturally fell into line by taking new oaths of loyalty or were simply fired from their roles.
All
of the above happened in darkness and in typically the space of a few hours
between midnight and dawn. Depending on the size of the country a few thousand
loyal soldiers were all that was required for a successful coup. If a more
detailed playbook were required then ‘Coup
D’Etat: a Practical Handbook’
by Edward Luttwak would serve the purpose.
No
more. That was the last century. Like many similar handbooks, Luttwak’s book is
obsolete. Things are different in the new millennium.
The
first sign that something was amiss came in July 2016 with the failed coup
attempt in Turkey.
Yes,
Turkey. A country where the military is revered and coups are (were) a normal fact
of life. Despite these two factors, the coup was neither able to dethrone
President Erdogan nor install a military council to run affairs of state.
Today
the world is witnessing the ongoing efforts by Myanmar’s military to unseat the
civilian government of Aung San Suu Kyi. At the time of writing, it seems
unclear if efforts by Min Aung Hlaing, the military commander leading the coup
attempt, will succeed. The coup is certainly not ‘done and dusted’ the way it would
have been in the past.
What
has changed in the last two decades to make successful, naked military
coups a rarity?
News Monopoly
Remember
the days everyone read newspapers in the morning at breakfast? Then families
gathered together in the evening to watch the news on national television. And
only the news that was fit to print was printed.
International
newspapers often arrived a few days late and circulation was easy to control.
There were no international television broadcasters. Even radio broadcasts by
international politically motivated broadcasters such as Voice of America or Radio Free Europe had limited success in shaping
opinions in target countries.
In
other word, national governments’ had a monopoly on information. Even print
publications of the ‘free’ press could be coerced by into reporting with a
particular slant or just simply not reporting certain events. A low ranking
officer posted at the office of the major newsprint companies and the national
radio / television broadcasters was sufficient to manage news flow.
Along came social media and broke the information monopoly paradigm. Not only has information become virtually impossible to control but the proliferation of disinformation, often politically motivated, has also become routine. Moreover, international news broadcasters are regularly watched in living room televisions all around the world.
Consequently,
managing negative news – or any news for that matter - associated with a military
coup is impossible. No state maintains a monopoly on news anymore. This less
controlled movement of information and the immediacy of many social media
platforms also allow ordinary citizens to mobilize protest movements in a
manner not possible in the past.
Global Superpower
Rivalries
The
Cold War between the US and its Soviet rival spawned many doctrines. All were expedient
for their time but among the most relevant (and loved) doctrine for coup makers
was the Kirkpatrick Doctrine. The doctrine was postulated by the
former US Ambassador to the United Nations Jeane Kirkpatrick in a 1979 essay.
In
her essay, Kirkpatrick made a distinction between Totalitarian and
Authoritarian regimes. While totalitarian regimes try and control all aspects
of a society and its citizens – including thought, authoritarian regimes try
and control only certain behaviours. Additionally, authoritarian regimes are
more amenable to gradual reform thus making them easier to move towards
democratic norms.
In
essence, the doctrine was Cold War influenced intellectual justification for
supporting authoritarian dictatorships from Argentina to the Philippines - as
long as these rulers supported free enterprise (read permitted US businesses to
operate freely) and sided with the US in its battle against Soviet inspired
communism.
In
practice, the Kirkpatrick Doctrine gave a blank check to coup makers to
overthrow leftist regimes. Once in control, these same coup makers could expect
continued support from the Free
World until the ‘threat’
from communism was defeated. Support for such right wing authoritarian regimes
was only withdrawn if / when the optics of maintaining domestic control became
untenable.
Corporate Dollars
and the Rise of Social Media
In
a bygone era, large multinational corporations often acted as catalysts for
coups. Whether it was a left leaning government that needed ‘course correction’
or a privileged monopolistic position in a market was under threat by
government policy changes, corporations were in the thick of things – typically
on the side of the coup instigators.
Note
the origins of the term, Banana Republic, which stemmed from the
installation of a military government via a coup in Honduras in the early 1900s. The coup was championed
and funded by an American businessman and founder of a fruit company with significant
economic interests in the Honduran fruit industry.
Things
did not change because multinationals miraculously grew a conscience and stopped
supporting dictatorial rulers. That was a slow process and relied largely on consumer
pressure. It reached critical mass in the 1980s as campus
activists pressured companies doing business in apartheid South Africa to divest
their holdings.
Activists
held that by doing business with a racist regime in apartheid South Africa,
large corporations like Bank of America and General Motors, were helping to
prop up the system. Initially, this led to the establishment of the Sullivan Principles, a voluntary code of business
ethics devised by a Baptist Minister, for companies involved in South Africa.
However, ultimately it forced businesses to rethink their presence in apartheid
South Africa.
Over
the last several decades, the trend of social activism has entered the mainstream
with concepts like ESG – environmental, social and
governance, becoming an essential part of the framework used to review and
analyze corporations. With the rise of citizen journalism and social media it
is virtually impossible for companies to cover up unethical practices,
including openly supporting regime change in foreign countries. On the
contrary, companies have found it almost essential to implement positive and
transparent ESG policies to cater to rising social awareness among contemporary
consumers.
The New Normal
The
generals in Myanmar are finding out the hard way that coups are an anachronism
of the last century. To be sure, the Thai military successfully executed a
coup in 2014 under
General Prayut likely because the coup was quickly legitimized by a much revered monarch,
the late King Bhumibol. The late King’s actions must be considered as a major
factor in the success of the 2014 coup. Arguably, Thailand is the exception
that proves the rule.
A
new balance in civil-military relations has been precipitated by changing
social conditions. While there is no clear rule for ‘new’ civil – military
relationships the experience of Turkey, Thailand and Pakistan are illustrative.
In
Turkey, the once all powerful Turkish military has had to swallow humble pie.
From being able to change a government by issuing a memo, Coup by
Memorandum, the Turkish military now plays a less powerful role under a
powerful president. In Thailand, the military has so far resisted meaningful
change. Though it is hard to predict how events will unfold in the coming
years. In Pakistan, the military’s dominance remains a key part of the state
power equation. Partly this is due to the military’s relationship with the
current Prime Minister Imran Khan and partly because the military establishment
has been careful in playing its hand. The possibility of the Pakistani military
establishment overplaying its cards a la Myanmar must loom large with senior Pakistani
generals.
As
for Myanmar, only time will tell how the situation will play out. Even if the
generals do survive intact until the next promised elections it is clear the
military junta’s operational freedoms have already been circumscribed by domestic
protests.
__________________
Imran is a Singapore based Tour Guide with a special interest in
arts and history. Imran has lived and worked in several countries during his
past career as an international banker. He enjoys traveling, especially by
train, as a way to feed his curiosity about the world and nurture his interest
in photography. He
is available on Instagram (@imranahmedsg); twitter (@grandmoofti) and can be
contacted at imran.ahmed.sg@gmail.com.
Friday, 8 January 2021
Singapore's listed REITs: an introduction
With a market capitalization of approximately SGD 800 billion (USD 595 billion) Singapore's stock exchange (SGX) is not among the world's largest. Indeed, within the MSCI (Developed Markets) World Index Singapore falls in the 'Others' category, along with thirteen other countries. These fourteen countries share the Index's six percent exposure to 'Others.'
The SGX is a powerhouse for listed Asian REITs. Currently, there are 43 REITs and Property Trusts listed in Singapore. These forty three securities represent almost twelve percent of the local market's capitalization at SGD 95 billion (USD 71 billion). They are diversified across virtually all sectors, the important exception being residential REITs. These sectors include retail, industrial, hospitality, healthcare and office. Additionally, over 80 percent of these entities have exposure outside of Singapore's small domestic market.
However, any investor evaluating REITs now has a whole host of new factors to analyze. The dynamics of a REIT's business is not the same as it was in the pre-COVID-19 world. Several new trends have emerged while some existing ones have accelerated. Notable trends are the Work From Home (WFH) phenomena and the increased adoption of e-commerce delivery platforms for retail sales.
Source: Pexels.com
WFH, especially in the financial sector, will affect demand for commercial office space. That's a serious concern for Singapore given that Finance and Business Services combined are almost 30 percent of the Republic's GDP, 14 and 15 percent respectively in 2019. Even a casual stroll through Singapore's old Raffles Place and new Marina Bay financial districts will leave no observer in doubt about the amount of office space currently occupied by big name banks and financial institutions.
Singapore's largest bank DBS recently announced that four in five of its jobs can be conducted remotely without any problem. Additionally, the bank stated in future it will allow all staff members to work remotely for up to 40 percent of their time.
Not all banks may move as aggressively as DBS to embrace the new post pandemic workplace realities. Nonetheless, the writing is on the wall and there is no going back to the days of yesteryear. In other words, in the medium to long term demand for office space from banks and financial institutions can be expected to moderate (if not decline outright).
But is it really all doom and gloom for Singapore's office property sector? Not exactly.
Firstly, the pandemic has reinforced Singapore's efficiency as a reliable business hub. Even during the city's strictest Phase I, Circuit Breaker (aka lock down) finance, trade and logistics businesses operated at or near full efficiency. Notwithstanding the issues surrounding foreign workers, Singapore's public health response was vigorous though sufficiently calibrated to avoid the type of total shutdowns experienced by many other economies.
Secondly, Singapore will be a net beneficiary of digital growth businesses looking to grow in Asia. Singapore provides an ideal springboard for broader Asian expansion. Such companies will look closely at Singapore as a site for regional headquarters for a variety of reasons clearly explained by new tech darling Zoom in a statement highlighting their own such decision.
“Singapore is pro-business, ranks as one of the friendliest countries to set up a company, and continues to be a favorite for regional headquarters as it boasts exceptional talent, strong infrastructure, and is a perfect gateway for engaging the wider APAC region … We plan to immediately hire employees, leveraging Singapore’s highly-educated engineering talent pool. Our new R&D center and data center will play a critical role in Zoom’s continued international growth.”
- Velchamy Sankarlingam, President of Product and Engineering for Zoom.
Lastly, logistics and even manufacturing companies looking to diversify operating geographies after suffering supply chain disruptions will give Singapore a second look despite the city's high operating costs. After all, it's better to pay slightly more for some (or all) of your supplies than it is to stop manufacturing altogether due to unexpected supply chain disruptions. Stopping business activities entirely, even for a short period, has potentially severe unintended consequences with strategic partners, including reputation and reliability.
Apart from office REITs, SGX has a large number of commercial mall REITs. Prior to the onslaught of COVID-19, shopping malls in Singapore were already adjusting to a world with e-commerce. Several malls had undertaken asset enhancement initiatives to reinvent the entire mall experience. For example, Funan Mall, the city's signature IT mall popular among techies reopened after a three year upgrade in December 2019 with a reduced emphasis on traditional shops and more on 'lifestyle'. That project started well before e-commerce
came into the limelight due to lock downs, etc. Additionally, malls were grappling with the slow but steady disappearance of traditional universal department store anchor tenants which were already struggling with the arrival of online retail sales.
To put plainly, even prior to the COVID-19 pandemic Singapore's retail malls were in the midst of reinventing the mall business due to the emergence of e-commerce as a long term competitive threat. Not surprising in a country with an Internet penetration rate of 87 percent (2019) coupled with safe and reliable connectivity.
The growth of Singapore’s e-commerce market will be supported by the country’s excellent internet technology. Fixed internet connections are typically almost triple the speed of the global average, and the country enjoys highly reliable, secure information and communications technology infrastructure. These factors have promoted high internet (87 percent) and mobile penetration (75 percent) levels among citizens.
- 2019 Global Payments Trends Report - Singapore Country Insights, JP Morgan
Moreover, as travel and tourism recovers in the post pandemic world it may be expected that initially some categories of travelers will be cautious about their choice of destination. These travelers will evaluate not only the public healthcare systems but also the reputational reliability of the host / destination country in its management of the pandemic. At least to date, Singapore comes out as a winner on these metrics. Consequently, Singapore and its shopping malls will be significant beneficiaries as international business and leisure travel to the city-state recovers.
With dividend yields ranging between two and seven percent p.a. for most SGX listed REITs, they present an attractive investment opportunity especially for yield hungry investors. However, Singapore's listed REITs are a varied lot (see table with data from September 2020). Investors must evaluate the management and financial resilience of each individual REIT before investing. To be sure, Singapore's regulatory environment helps in ensuring a certain level of transparency and solvency within the sector. However, regulatory requirements generally only set the bare minimum of standards. Investors looking to invest in the entire sector have three ETFs to consider. All are listed on the Singapore Exchange but are relatively small in size with the largest having SGD 250 million (USD 188 million) in assets under management as at December 2020.
________________
Imran is a Singapore based Tour Guide with a special interest in arts and history. Imran has lived and worked in several countries during his past career as an international banker. He enjoys traveling, especially by train, as a way to feed his curiosity about the world and nurture his interest in photography. He is available on Instagram (@imranahmedsg); twitter (@grandmoofti) and can be contacted at imran.ahmed.sg@gmail.com