‘Gotong Royong’ is the Only Way for Indonesia Fintech

Ask ten thousand people when they think the Indonesian fintech industry was born, and you’re going to get as many birth date guesses as there are islands in Indonesia. Some would say it began with the release of OJK Regulation №.77/POJK.01/2016 by Otoritas Jasa Keuangan in January 2017, where Indonesia’s regulator unveiled its initial framework to regulate and facilitate the development of the fintech industry. Others would claim it began earlier, with the founding of the earliest fintech startups in the various fintech verticals of payment, remittances, crowdfunding, lending, asset management and marketplaces. And then there are others — banking and finance veterans — who try to remind us that fintech is merely the latest buzzword coming off the backs of earlier waves of digitization in banking and finance that gave us online banking over WAP before the age of smartphones.

Over the past few decades, the definition of fintech has expanded rapidly to match the relentless pace of technological progress; from the initial application of technology to the back-end of banking and finance, to its present-day portmanteau that applies innovation to the frontiers of information and communication technology, transforming financial activities for individuals and companies. With the likes of networking, computer science, computer vision, artificial intelligence, machine learning and even distributed ledger technology, we’re seeing the complete overhaul of the finance experience for individuals and companies across the realms of trade, banking, financial advisory, and in the origination, underwriting, pricing, promotion and operations of financial products.

History Repeats Itself, I-Win-You-Lose, but There Is Hope.

As the Luddites of the early 18th century (1811–1816) have shown us, technology-induced disruptions in any industry tend to incite significant feelings of helplessness and despair among the disenfranchised, while exacerbating gaps in efficiency and competitiveness between those who become adept in harnessing its innovation and those who can’t. I started my career in 2006 as a policy maker specializing in the ICT industry in Singapore, became an early-stage technology venture capitalist in 2010 investing in tech startups in Southeast Asia and North America and have been a tech entrepreneur in Southeast Asia since 2013. Across all three sides of the table — initially as policy maker, industry developer and regulator, later on as investor and fund manager and most recently as entrepreneur and business leader — I have developed keen appreciation for the levels of close cooperation and ‘constructive agility’ needed between regulators, innovators and consumers to ensure that there is a sufficiently robust regulatory sandbox to give innovation room to thrive, while minimizing those that are left behind by the growing digital divide.

It is with the above in mind that I laud OJK’s invoking of Indonesia’s gotong royong kampung spirit as encouragement for greater collaboration between alternative fintech and mainstream banking and consumer finance. It is a breath of fresh air amidst antagonistic media portrayal that positions fintech companies as upstarts competing with financial institutions for customers and eroding the income of those who are slow to embrace new technologies. Ironically, some banks have even been quoted to expect regulators to level the playing field by ensuring that there is equal regulation between traditional banks and the fintech industry to ensure that banks will have no difficulty in competing with new-kid-on-the-block fintech. Among fintech players, Aidil of UangTeman has not helped matters by suggesting that the Indonesian online lending is a tragedy waiting to unfold for regulators and investors alike, thanks to the easy availability of cheap and dumb foreign capital flooding into Indonesia seeking fast and aggressive growth.

As banking, finance and fintech industries experience rising entropy, we see those among us who have chosen the easier “I-win-you-lose” narrative and focus on negatives and how our differences divide us and potentially hurt one another. I stand opposed to this regressive view and adopt the other side of the same coin, arguing instead that it is much more sensible for upstart fintech and mainstream banking and finance to seek out common ground and mutually beneficial opportunities. I am heartened to note that I am not alone in holding this view, and am at least joined by banking veterans such as Jerry Ng, President Director of Bank BTPN, who discussed the differences in operating cadence between traditional banks and fintech companies, urging both parties to leverage on their core strengths in credit scoring using unconventional data by relying on the balance sheet of banks and the data science capabilities of fintech players.

TunaiKita as Part of Indonesia’s Fintech “Gotong Royong”

My talk at Money 20/20 Asia titled “Enabling Smarter Credit Decisions with New Datasets and Models”.

As one of Indonesian regulator OJK’s forty-odd registered peer-to-peer lending platforms, TunaiKita has actively promoted our unique institution-to-peer (i2p) lending platform — the first of its kind in Indonesia — to our banking and multifinance lending partners in Indonesia. Unlike traditional crowdsourcing peer-to-peer players in Indonesia, we do not accept consumer lenders on our platform and instead work exclusively with institutional lenders such as local banks and multi-finance companies.

Our mobile app is accessible across the 27 largest cities in Indonesia, across the islands of Java; Jabodetabek as 5 cities, Bandung, Surabaya, Semarang, Kudus, Yogyakarta, Surakarta, Magelang, Malang, Kediri, Jember, Gresik, Banyuwangi), Bali (Denpasar), Sumatra (Medan, Palembang, Padang, Pekanbaru, Batam), Kalimantan (Banjarmasin) and Sulawesi (Makassar, Manado, Pontianak).

Our fraud-resistant platform acquires new and repeat individual borrowers entirely via online channels through their smartphones and our mobile app, performs e-KYC to ensure their identity and provides borrowers with an accurate credit score powered by our proprietary ‘lending robot’. Individuals can then apply for loans that match their needs, backed by institutional lenders.

As a peer-to-peer loan arranger, we recommend and facilitate a loan between our institutional lenders and consumer borrowers, giving Indonesians anywhere-anytime access to unsecured consumer loans from the convenience of their smartphones, with loan amounts ranging from as low as Rp.500rb up to Rp.20mio with flexible tenures of between 10 days to 12 months. We approve and disburse loans to borrowers’ bank accounts 7 days a week within 24 to 36 hours via multiple redundant integrations with local Indonesian payment providers. We remind borrowers to repay on time and conduct respectful loan collection from overdue borrowers on behalf of our institutional lenders.

Despite being a startup in Indonesia with barely a year of operations under our belt, TunaiKita is actually a subsidiary of Wecash, a big data tech company founded in Beijing in 2013 that has since raised more than US$260 million over 4 rounds and more than 800 people across our offices in China, North America, Brazil, Singapore, India and Vietnam. TunaiKita also counts publicly-listed multi-finance company Danasupra Erapacific (IDX:DEFI) as its local minority shareholder. We have successfully commenced a lending collaboration with our first BUKU III bank earlier this year; all this while growing our Asia Pacific team to over 100 people across Singapore, Indonesia, Beijing, India and Vietnam, and climbing up the ladder to become the top free lending app in the Finance category of Indonesia’s Google Play Store since 22 May 2017.

It takes the Wecash village — comprising of our team, lending partners and tech partners — to raise the TunaiKita child. It would take everyone to embrace the gotong royong spirit (and each other) if we are to move the fintech-finance industry forward in the coming years.

Indonesia Fintech’s Four Horsemen: Fear, Uncertainty, Doubt and Greed

Yet, all our talk about collaboration in Indonesia fintech will go nowhere if we allow ourselves to be blinded by fintech-finance industry’s Four Horsemen.

Conquest, War, Famine and Death, reborn as Fear, Uncertainty, Doubt & Greed

Let me start with Fear.

There is a common misconception that fintech companies should have higher non-performing loan (NPL) ratios compared to traditional banks and consumer finance companies. Purporters of this fallacy fail to recognize the technological prowess of big data, machine learning and artificial intelligence to collect vastly more data and to dynamically train and tune credit models and cut-offs to achieve far better and responsive results than traditional underwriting typically conducted in mainstream financial institutions. By conflating NPL of consumer loans to that of corporate loans, or by relying on snapshot portfolio NPL instead of more indicative NPL figures via vintage analysis, we allow ourselves to be distracted by the shadows of fintech’s “high NPL” and fail to appreciate its benefits in providing greater financial access to the missing middle in the Indonesian society.

Next comes Uncertainty.

Another common misconception is that higher NPL by fintech companies relative to banks and multifinance companies’ NPL ratios equals higher risk and implies poorer credit quality and portfolio performance. Propagators of these falsehoods fail to recognize that thin-file, new-to-credit customers are inherently higher-risk and harder to acquire compared to more digitally aware, bankable consumers. Interest rates for shorter-term loans will always be higher for riskier borrowers than installment loans for borrowers with better credit scores, to account for higher loan delinquencies in those borrower segments. The NPL of any new loan portfolio with new borrower segments will always take time to stabilize as credit models get trained and underwriting improves.

And then there’s Doubt.

How could fintech companies ever identify and approve borrowers without requiring a wet (ink) signature? Indonesian banks need to comply with face-to-face Customer Due Diligence (CDD) KYC processes or fallback to biometric (face, fingerprint and/or iris scanning) protocols. How can Indonesian regulators so cavalierly permit fintech companies without greater levels of equity capitalization to perform seemingly weaker versions of e-KYC act as peer-to-peer arrangers of loans? Can Indonesian banks act as institutional lenders via fintech P2P regulatory frameworks? How would banks’ CDD KYC requirements work under P.OJK77/2016? Should peer-to-peer fintech companies be subjected to greater equity capitalization requirements than just the minimum IDR 2.5 billion OJK mandated?

There are so many questions lingering on our minds, yet so few ready answers to blow away the clouds of Doubt. Yet, if there is a will, there will be a way. You can be a doubter by the sidelines, or you can be a do-er and build this industry up, felling one doubt at a time alongside the rest of us in the fintech-finance industry.

Last but not least, we are left with Greed.

As the old saying goes, “the enemy of my enemy is my friend”. Yet, even amongst fintech players, there are some who view other peers as competitors out to starve each other of oxygen in the room. I think the fintech industry is currently far too nascent in development to focus on competing with our peers. The market is large and early enough such that we aren’t yet bumping into each others’ elbows (yet!). The finance industry is also unique in the sense that no one winner can ever take all. It behaves more like a network of centralized trust nodes. Banks lend to each other and also to multi-finance companies, while consumers borrow from different banks and multi-finance at different times for different purposes. We have also seen how a bank’s popular loan product often quickly inspires countless other me-toos by other banks.

And in other news, money is green.

This same network effect between capital, corporations and consumers is set to repeat itself in the fintech-finance industry where sharing, collaboration and frenemies should always trump outright disdain, antagonistic relationships and petty squabbles between competitors.

I’m pretty sure fintech naysayers are gleefully clapping when we fight among ourselves and jostle for favour with regulators. I have come to learn about interest groups that lobby regulators for an interest rate cap to create greater distinction between lintah darat-like payday loans and peer-to-peer platform loans. This goes against the spirit of “gotong royong”. First up, payday loans are short-term loans alongside installment loans for consumers and corporate loans for businesses, with each serving entirely different borrower segments and risk profiles. Peer-to-peer is a mechanism of loan arrangement and co-underwriting, and can be used to facilitate loans to consumers or companies. It does not make sense to compare the two. Secondly, I do not believe it is pareto-efficient to prematurely introduce lending interest rate controls in the name of “consumer protection” from “predatory interest rates” this early in our growth curve when Indonesia will be better served in letting the market undergo several years of price discovery (just like China did) and permitting fintechs to bring thin-file, new-to-credit customers onto the SLIK system and our newly formed credit bureau databases.

Profit (or Loss) = Principal x (1 — NPL) x (1+loan interest) less Operating Expenses less User Acquisition Cost less Cost of Funds

No matter whether you are a fintech peer-to-peer arranger, a bank or multi-finance, we all operate upon the same universal formula (above). With or without enforced interest rate caps, the inherent NPL of subprime new-to-credit customers will stay the same; capping loan interest can only result in an increase in the Cost of Funds to maintain overall profitability. A clearer distinction needs to be made on consumer protection as applied to consumers as lenders and consumers as borrowers. In deliberating on consumer protection where consumers are borrowers, regulators should avoid the heavy hand of interest rate caps and focus more on consumers’ financial literacy, standardized interest calculation and fee representation by peer-to-peer platforms.

Gotong royong is the only way for Indonesia fintech. What do you think?

It’s been an exciting past year and a half in the Indonesian fintech industry, and I thank my team and institutional lending partners for their support. I’ve learnt a ton from my friends and partners in the industry and look forward to speaking to more like-minded folks on how we can harness the kampung “gotong royong” spirit to transform the consumer finance experience for individuals across Indonesia. You can write to me at james@wecash.asia or james@tunaikita.com.

Pulling the (virtual) World to Singapore

Until the invention of the first electronic general-purpose computer in 1946, humanity sought to bring order to our analog world by sorting and classifying information through manual, then electro-mechanical means. Networking technologies became tinder to the kindle that is computers, eventually becoming the fire of the Internet.

Apart from changing the way we create, connect, communicate and consume, the Internet has brought about dramatic shifts in how businesses compete, underpinning wave after wave of fast-growing companies that create a slew of intelligent software and networked machines.

These are displacing an increasing number of jobs in offices, factories and even on the road. Jobs are being polarised not just in Singapore but also in other advanced economies. To make matters worse, the network effects of the Internet encourage winner-takes-all outcomes, with a handful of companies making most of the profits. Today, we are faced with the Internet Condition — a new paradigm where such companies transcend geography and sovereignty, with some becoming more powerful than countries.

In 2015, Facebook’s 15,879 employees generated revenues of US$17.9 billion while Google’s 61,814 employees generated revenues of US$74.5 billion. Combined, the two behemoths have a “GDP per capita” exceeding 20 times that of Singapore. Eight of the biggest United States technology companies, accounting for more than a fifth of the US$2.1 trillion in profits that US companies hold overseas, added US$69 billion to their cash hoard in 2015.

In comparison, the Singapore Government had an operating revenue of S$64.2 billion [1] and over 146,000 public servants [2].

Singapore’s economic restructuring has entered its next lap with the formation of a Committee on the Future Economy. But this is in itself may not suffice in transforming Singapore’s economy as our world moves beyond the Internet to the Internet-of-Everything.

Singapore needs to nimbly refashion itself to benefit from this technology-accelerated paradigm shift. The Internet, an interplay between Capital and Data, is a stateless and potentially chaotic global commons where rule of law, equality, and general good sense do not always prevail. Some free software and services are not actually free, as they often result in the service providers obtaining and monetising valuable personal information of users. The cross-border distortions brought on by such witting and unwitting trades will not be accurately represented by a national statistic such as the Gini coefficient, which measures distortions between Capital and Labour.

Currently, governments can address income inequality arising from existing distortions through transfers. However, Internet-exacerbated gaps create natural monopolies in a virtual world. These do not require physical presence in-country to generate revenues and do not necessarily contribute meaningful tax revenue to their foreign markets.

Google made £6 billion in profits from the UK in the decade after 2005 but paid less than 3 percent in taxes. Granted, Google had contributed non-tax value to the UK economy by investing £1 billion to build a 5,000-employee office in London, but not every country will be as fortunate. The Economic Development Board estimates inbound investments of US$8 to 10 billion into Singapore for this year, down from US$11.5 billion in 2015 and our lowest in a decade [3].

The case for a more Internet-oriented dimension to Singapore’s restructuring efforts is clear when one considers the massive opportunities latent in the fact that two-thirds of the world’s 7.4 billion people remain disconnected from the Internet, and are more likely to get online through either closed platforms by Facebook or Google, or open-source initiatives by the likes of Mozilla Foundation.

Facebook launched Internet.org in 2013 alongside Samsung, Ericsson, MediaTek, Opera Software, Nokia and Qualcomm to provide affordable internet access to all. That same year, Google announced Project Loon to provide Internet access to remote areas through high-altitude balloons. Despite declines in recent years, Mozilla’s Firefox browser remains the third most popular browser on desktop and mobile in the world.

We should not distrust the chaos of the Internet or seek to control it; it is intrinsically anarchic. Yet, there is no reason why Singapore cannot learn from these companies and organisations to embrace the principles of the Internet itself — collaboration, sharing, transparency, and empowerment — and augment our traditional twin economic “actors” of Capital and Labour with Data.

Mozilla started in 1998 as a free-software community created by members of Netscape but has since evolved to champion an open and participatory Internet for everyone. Just as Singapore’s National Trades Union Congress is our national advocate for the unique tripartism between our labour unions, employers and the Government, the Mozilla Manifesto guides its own form of “networked tripartism”: among Mozilla Foundation as a non-profit, Mozilla Corporation as a taxable entity generating US$329.5 million in revenues from over 1,000 employees, and Mozilla’s online user and contributor community.

Such tripartism could well be Singapore’s next big thing; there is no reason why governments cannot compete with technology giants for the trust of their populace [4]. The Smart Nation effort is an important first step, but we can do more, quicker and better; and offer platforms that not only improve the lives of our people and spur commerce and innovation, but also strengthen Singapore’s thought leadership and international stature.

Citizens around the world rely on government-issued documents for proof of identity. Our government could consider developing a framework for a nation-wide digital identity and payments platform that compete with existing solutions by the likes of Apple, Google, Facebook and WeChat.

For instance, Singapore could update SingPass, the Singapore Government’s online tool for access to local e-services, to employ a combination of block-chain based Public Key Infrastructure, user behaviour monitoring and multi-modal biometrics (such as voiceprints, facial and iris recognition) for more robust user authentication and fraud detection. A more secure SingPass with the potential to substitute the need for in-person identity checks could serve as a robust gatekeeper to MyInfo, and catalyse the adoption of SingPass and MyInfo not just in public e-services, but also in banking and payments, both on our shores and beyond.

This can equip Singapore to not only serve its resident populace well, but also give our country the ability to reach out to overseas Singaporeans while inducting e-citizens — aspiring businessmen, foreign workers, emigrants, and individuals abroad — who want to invest, interact or associate with “virtual” Singapore.

Singapore can then build a “national operating system” around the SingPass-MyInfo core that manages, stores and permits appropriate access to data gleaned from the tens of millions of smart objects embedded throughout our homes, neighbourhoods and work places.

While working towards widespread adoption within Singapore, our government can leverage upon the Smart Nation-inspired execution to drive international conversations around the ethics, regulations and standards for similar implementations in other countries; partially open-sourced, with the remainder rebuilt locally due to local conditions or data and security concerns.

Over time, this could create an online federation of e-national identities that, when linked to an individual’s e-identity and database, could permit quicker, easier and more transparent immigrations and customs activity.

An Applications Programming Interface — a set of protocols that allow apps to talk to one another across different services and technology platforms — could be provided for the same system.

From this, a national or regional online developer community could be fostered and encouraged to develop its own applications, thereby spurring innovation and lower cost.

Conceptually, this is no different from how our country courted multi-national corporations and their technology and investments during our industrialisation years of the seventies to the nineties. However, instead of attracting Capital and offering Labour, Singapore needs to offer a firehose of Data to appeal to future innovators. We urgently need to skate away from our physical waterways of today, towards the digital river pucks of tomorrow.

Our past was built on intelligent and audacious risk-taking. We will need similar courage in the future. Our next phase of evolution will need us to exert a virtual “pull” on the world, rather than simply pushing ourselves onto and into it.

View the original essay in The Birthday Book 2016: “What is Singapore’s Next Big Thing?”


[1] Budget 2016 — Analysis of Revenue and Expenditure

[2] Straits Times — Parliament: Singapore’s public sector workforce expected to grow 2.5% a year

[3] Straits Times — Foreign investments to drop but more skilled jobs ahead

[4] lithub.com — Why do we trust a corporation more than the government?

I first authored this piece for The Birthday Book 2016, a book of essays by 51 different authors on Singapore’s Next Big Thing that launched in end-Aug 2016. I made further tweaks to my piece thanks to TODAY’s editorial team, which was published on 16 December 2016. I then merged the best bits of the original piece and TODAY’s version for the article’s v3.0. You can find the original article at the end of this page.

Amazon’s entry an urgent wake up call for Singapore’s retailers

I authored this essay for TODAY’s commentary column which was run on 4 August 2017. Many thanks to Jason Tan of TODAY for the invitation to contribute my thoughts and to the editorial team for helping with the title. I am republishing my submission as public record.

Singapore’s glistening skyline disguises a worrisome decay that has stricken the retail sector over the past few years. Faced with the one-two punch of a smartphone-toting consumer demographics making purchases on-the-go and the relentless onslaught from e-commerce, local retail stores and chains are finding themselves caught between a rock and a hard place. Many have been forced to downsize, relocate in pursuit of cheaper rent or shut down. Amazon’s entry into the Singapore market last week marks another development which could significantly alter the retail landscape here.

It is grudgingly accepted that Singapore and Orchard Road are no longer the shoppers’ paradise they once were. Rumours of Amazon’s planned operations in Singapore had been swirling in business circles and reported by media over the past months, so its entrance into the Singapore e-commerce market last week came as little surprise to me despite the overwhelming demand from consumers. Much of the damage to Singapore’s retail and commercial real estate sectors had already been inflicted by Amazon’s predecessors in Singapore, so this latest development feels less a harbinger of further retail demise along Orchard Road and more the opening act for Amazon e-commerce’s inevitable expansion into Indonesia.

Granted, the decline in traditional retail is a global phenomenon not unique to Singapore. The retail sector in the United States has been hard hit, with nine bankruptcies and apparel companies’ stock prices hitting multi-year lows. Chainstores JC Penney, RadioShack, Macy’s and Sears have each announced more than 100-store closures. From 2010 to 2016, Amazon’s sales in North America grew four-fold from US$16 billion (S$22 billion) to US$80 billion. In comparison, Sears’ revenue in 2016 was about US$22 billion, a mere one-third of Amazon’s growth over six years. In China, local and foreign retail players shut stores without opening new ones over the past few years, with companies such as Parkson and Marks and Spencer hit hard.

While mind-boggling, such phenomenon is not new; new technology and their corporatised torchbearers displacing lagging predecessors have repeatedly played out since the Industrial Revolution. What is more worrisome is the accelerating pace and scale of the resultant labour displacement and the declining job mobility of disenfranchised workers that are keeping politicians and policymakers around the world awake deep into the night. Amazon fulfilment centres employ less people than traditional retail stores and rely heavily on software, robotics and automation. According to the US Bureau of Labour Statistics, the US retail industry has lost an average of 9,000 jobs a month this year, compared with average monthly job gains of 17,000 last year.

Still, with e-commerce in South-east Asia set to hit US$88 billion by 2025 from US$5.5 billion in 2015, further store closures are likely to spread from downtown Singapore into our heartlands. I was just at Kallang Wave Mall this past weekend with my family and almost missed the empty shopfront that used to be a Harvey Norman store. If a store closes in a mall and no one is there to notice, does it still make a sound?

The Amazon of the early 2000s was blamed by some for contributing to the downfall of offline bookstore chains such as Borders. The Amazon of today is a diversified behemoth extending beyond online retail and marketplaces into groceries, cloud computing, content and artificial intelligence; a far cry from its humble origins as an online bookstore that took more than four years to break even after going public in 1997.

Beyond bricks-and-mortar retail, local and regional online players will also come under pressure. Giosis’ Qoo10, Alibaba’s Lazada and SEA’s Shopee are the first three names that come to mind, followed by Indonesia’s homegrown players Tokopedia and Bukalapak. In the online groceries space, Lazada’s Redmart and start-up HonestBee will soon feel the heat of going toe to toe with Amazon’s one-hour and two-hour delivery guarantees. If and when Amazon Prime Video makes landfall, it will join a crowded cast of video streaming options such as Netflix, Rakuten’s Viki, HOOQ, Singtel CAST and StarHub Go in vying for local eyeballs. To be sure, local and regional retailers have started to offer similar integrated services with the likes of Lazada’s LiveUp that also adds the allure of Netflix, Uber and UberEats to enhance consumer loyalty. Same-day deliveries are already being offered by Lazada and Qoo10 by now.

An Amazon fulfilment centre – from Wikimedia Commons

The jury is still out on whether Amazon can successfully woo consumers after Prime Now’s bumpy introduction into the Singapore market last week — uncharacteristic of Amazon given its assumed familiarity with the region and its track record for a well-oiled logistics and delivery in North America and elsewhere in the world. Most of us forget and take for granted Amazon Web Services’ presence in Southeast Asia through Singapore since 2010. While that is 4 years ahead of Alibaba’s S$279.1 million investment in SingPost back in 2014, Amazon is without the extensive logistics and delivery infrastructure it enjoys in North America. But these are early days.

Amazon’s bigger challenge may lie in conquering South-east Asia, home to more than 600 million consumers with a high smartphone and mobile internet penetration in the key markets of Indonesia, Philippines, Vietnam, Thailand and Myanmar. It is also a fragmented region fraught with socio-economic nuances and operating complexities that will take significant resources and time to overcome and may constrain return-on-equity payoffs when compared against larger and more homogenous markets of India and Middle East. Some may even go so far as to claim that Amazon is slow to act in South-east Asia compared to Alibaba, but it would be premature to write off Jeff Bezos’ next move. One thing’s for certain though; to conquer this region, Amazon will need to build up consumer loyalty by delivering the same unparalleled experience it is famed for in North America to regional consumers, starting with Singapore.

Consumers are the biggest beneficiaries of intense online-to-online and online-to-offline cannibalisation as they gain product, pricing and service choices across players. The picture is less rosy for businesses and companies connected to retail brands, stores, mall developers, owners and managers. My family of five has switched the bulk of our consumption away from offline stores to local and cross-border e-commerce from several years ago. I no longer watch cable television, preferring online groceries and home-cooked meals to eating out and have limited our mall visits to coffee joints, the occasional weekend meals and movie outings. I predict more families like mine to follow.

It is easy for shareholders of retail brands, stores, mall developers, owners and managers to misread their tea leaves and be convinced that there is still plenty of time to respond to online threats given their relatively lower cost of financing and larger balance sheets. It is also challenging for non-technology companies to transform management and gain the organisational capabilities to successfully manage the transition to the new retail paradigm. In the meanwhile, Amazon has showcased its checkout-free Amazon Go concept store and acquired Whole Foods for US$13.7 billion. Alibaba also launched three new Hema supermarkets in Beijing and Shanghai with significant mobile and payment integrations as part of its online-to-offline “New Retail” strategy. In response, local retailers here have been forced to up their game, investing in quick-wins such as self-checkout counters and new initiatives including NTUC FairPrice’s first unstaffed cashless convenience store under its Cheers banner, and Sheng Siong’s Allforyou e-grocer service. But is it enough?

The Internet encourages the formation of natural monopolies that aggregate data and users and where winners take (nearly) all. It is not Amazon that is late to South-east Asia, but traditional retail and malls that have largely missed the plot. Bricks-and-mortar retail and malls are set for darker days ahead with further consolidation and loss of market power. However, good malls, however disrupted or transformed, can remain relevant as social and community spaces that offer a respite for gatherings by friends and family amidst a rapidly urbanising region.

New malls will always attract initial buzz and visitors because they represent the undiscovered in the known Singapore urbanscape, but not all malls will maintain their footfall over time.

At the end of the day, a fundamental change has taken place in the conversations between retail tenants and mall owners, with the latter once used to having the upper hand in rental pricing now having to adjust to online retail and its ability to add new brands with impunity at near-zero marginal cost.

The next wave of online retailers will blend the Internet-of-things and artificial intelligence to transform the offline retail experience and extend their reach further into the physical realm. It will be important for Singapore’s corporate leaders and denizens to understand the changing dynamics, step out of their comfort zones and chart their own way forward amidst these turbulent waters or risk being left behind.

Photo source: George Hodan of publicdomainpictures.net

Once Bonded, Reloaded

Just like Yu-Mei Balasingamchow, I penned my name on a legal document in 2000 that effectively willed 6 years of my life – after the mandatory military service and the sponsored US university education – to the Singapore Public Service.  The ‘golden ticket’ was like a dream come true – a chance for the eldest son of a very middle-class Singapore family to get away from the stuffy Singapore British-inspired education system.  In exchange for a 4-year all-expenses paid education in a top-class American engineering university, both my parents became my sureties; an act that would have made them liable for a staggering sum of S$472,000 in liquidated damages if I ever reneged on my scholarship contract.  Up till then, I had never heard about study loans or bursaries, or understood concepts such as ‘leverage’ or ‘opportunity cost’.

It was towards the end of 1998 that I was informed by my teachers that I had not done well enough at the end of my first year at junior college to sit for 2 ‘S’ Papers at the 1999 GCE ‘A’ Level exams.  I appealed for the chance to sit for 2, but was only successful for 1.

Truth be told, I deserved it.  I could quote family issues and an over-commitment to my extra-curricular activities as reasons for my poor performance during the year-end Promotional exams, but deep in my heart I knew there were no excuses for failing to meet the mark.

In those days, overseas scholarships were deemed as the epitome of a Singapore student’s academic career.  Scarcity can be deceptively alluring; everyone, including me, wanted a shot at one.  At the same time, everyone believed only candidates with two ‘S’ Paper distinction holders (on top of a four straight A GCE ‘A’ Level result) would qualify to be considered.  As the ‘A’ Level exams drew close, all my classmates (which represented ~80% of the class) that were registered for two ‘S’ Papers at the ‘A’ Levels received invitations in their mailbox to apply for government scholarships.  For weeks, checking my mailbox became a daily routine, one that always ended in disappointment.  It would seem the elitist pressure-cooker Singapore education system had not deemed me to be worthy enough of an invite.

I refused to give up and took my crusade online, where I found the Singapore Inc. scholarship application forms available for download.  I printed, completed and mailed it at about the same time as every other double ‘S’ Paper candidate, and was pleasantly surprised and quietly triumphant when I made it through all 3 rounds of the gruelling selection process.  The government’s generous offer was not missed by my ego, especially after witnessing many peers that I had considered superior to myself get drop by the process at each stage.  So quick was my acceptance of provisional scholarship offer in February of 2000, that I had to say “thanks but no thanks” to the Public Service Commission’s invitation for a second round interview when they called me up some weeks later.  I had naively thought that one government scholarship (or entity for that matter) was no different from another, and that it would not matter where I served as long as I was in government.  It would be many years later before I understood that not all scholars were ‘born’ equal.

Unlike Yu-Mei, I never revisited my bond documents in the years that followed.  When I started work on August 1st, 2006, the thought of breaking my bond never crossed my mind.  I was eager to serve and repay the debt of honour that comes with being a government scholar.  I was, and still am grateful for the opportunities to learn at world-class universities, meet all sorts of people and see the world while I was at it.  Many Singaporeans like to say that their time in the army turned them from boys to men.  For me, it was my 4 years abroad in the US that really helped me mature into an adult.

Once I got past the honeymoon period and found my public service ’sea legs’, I was better able to objectively evaluate the overall construct that I was a part of.  There’s really no denying the good that we public servants do – from the jobs created, foreign direct investments secured, progressive tax policies formulated, ever-increasing levels of value-add to our economy – the list goes on.  What I was more curious about was whether the construct also subscribed to the same set of Organisational Behaviour principles that I resonated with.  And so I kept my eyes and ears open, soaking up every nugget of information with an open mind, and in the process, despite the optimist in me, I was powerless to prevent myself from becoming jaded.  I observed unhealthy levels of groupthink and top-down decision making; bloated and risk-averse middle management that was also afflicted with delegation disease; managers who were keen to ‘do things the right way’ instead of ‘doing the right things’.  I admired the few good men that remained behind to hold the fort, but lamented the big chunk of talent that had since left the bureaucracy.  Most of those who are left behind have largely lost their fire.  You can see it in their eyes.

I have many friends who work in the ministries, who describe a vastly different work ethos and levels of derring-do with their ministry colleagues and superiors.  It would seem that the Public Service Commission has gotten something right there.  A case of agile and nimble ministries with an essentially flat organisational structure perhaps?  Or a fear of more severe reprisals from the Ministers themselves?  Whatever it is, I’m glad it works for them.  I just wish our statutory boards had more of those positive elements throughout the rank and file.

And so I kept my head down, working hard and learning from everything that came my way, while doing my best to keep my own fire alive.  I spent the following 3 years (1) promoting Singapore’s infocomm e-government expertise and solutions to counterpart government agencies of developing nations, (2) attracting and anchoring venture-backed start-ups to establish R&D operations in Singapore, (3) making equity investments in Singapore-based growth-stage infocomm enterprises and (4) formulating and designing industry development policies and incentive programmes.  I considered myself very lucky because I was able to serve my country without sacrificing my personal and career growth.  I reported to great bosses and worked in awesome teams.

Yet, in the end, I still made the decision to leave – before my 6 years was up.  November 27, 2009 marks my last day of public service after 3 years and 4 months.  I am terminating my bond, and have officially joined the ranks of “quitters”.

One can always glean valuable insights by reading the speeches released by the various government agencies.  I was cued to an interesting one titled “Defending Scholarships but not all Scholars“, delivered by the Chairman of the Public Service Commission (PSC), Eddie Teo at the recent Singapore Seminar 2009 in London on October 31, 2009.  In his speech, he shared that in the period of 1999 – 2008, there were only 7 PSC scholars out of a total of 791 (0.88%) that had terminated their bonds without serving a single day in the Service.  The statistic was (presumably) to lend authenticity to PSC’s scholarship selection process’ ability to separate the wheat from the chaff.

However, we still get upset with scholars who break their bond without serving even one day after they finish their studies.  They have wasted the PSC’s time and effort and used taxpayers’ money upfront for their selfish purpose. Even if there is no scholarship quota, there is an opportunity cost to every taxpayer dollar spent on scholars.

Interestingly, Mr. Teo had less figures to show for scholars who complete their bond and leave the bureaucracy.  I only hope the bureaucracy’s ire does not extend to this unmentioned group of ex-scholars that I now belong to.

There are also some scholars who finish their bond and leave for positive reasons. Some scholars move on because they want a change in career. Nothing wrong with that especially if they stay in Singapore or contribute to Singapore in other ways. Others want to care for their young children. As a family-friendly nation, we should applaud such a motive. A few get invited to tea and become politicians. Others go on to become successful entrepreneurs and managers in the corporate world. And if they stay in Singapore or work in Singapore firms overseas, they can still make a contribution to Singapore.

What of those who finish their bond and leave for less positive reasons? The topic is deftly avoided – handiwork of a masterful speech writer.  Does the second bolded statement also reflect the Singapore Government and our Ministers’ stance that Singaporeans who don’t stay in Singapore or don’t work in Singapore firms overseas can’t make a contribution to Singapore?  I sincerely hope our mandarins have not become this myopic.

I caught up with a scholar friend over lunch one day, and the conversation topic naturally gravitated towards the state of affairs of the bureaucracy, and more specifically, my personal opinions about the challenges faced by the senior management and HR departments of our statutory boards in building an organisation that has a high ability to retain its talent, in order to achieve its full potential to implement policy decisions by our ministries.  His subsequent pragmatic reply came as no surprise:

It’s more realistic (for oneself) to work within the boundaries of the system, and be realistic about what one can control and change, while continually extending one’s sphere of influence.

I tried to tell him that while the above may be the perfect mentality to adopt in order to keep that personal ‘fire’ burning, it certainly doesn’t make what was going on within the construct acceptable.  I was concerned about the lack of urgency and conviction in resolving some of these issues, and reiterated my concern at the apparent pace (at least to me) at which our statutory boards were losing talent (both scholars and non-scholars).  His response is a classic example of one well-honed by the system to say a lot, without really saying anything at all.

Some people are better suited at playing the game than others.

I guess my departure meant I was not suited to the ‘game’.  Social engineering has trained a large cohort of cows who moo when they are told, yield milk when their udders are tugged and eat when they are set loose to graze.  Have we become a nation honed in the art of taking orders and following instructions, but faring poorly when crossing unchartered waters?  God bless Singapore!

Whoever drew up the terms of these scholarships should be awarded a Public Administration Medal, for the excellent deterrence provided to the less patriotic amongst us who have lost the desire to repay their debts of honour to the nation.  All the perceived ills of the establishment would not have been sufficient to push me to take the red pill, thanks to the hefty 6-figure liquidated damages that still remain on my contract.

I chose to leave because I have been granted an extraordinary opportunity to change Singapore, and hopefully change the world much faster than I could ever have from within the bureaucracy, as an insignificant Grade-8 Assistant Manager – tiny really, in the overall scheme of government things.

With this post, I fulfil a promise to myself, to share my own story someday.  If you come across this, and are or once were a government scholar, I urge you to share your tale (good or bad) and track back to my post.  Our youths deserve to know what they are signing up for.

NB 1: A friend of mine later printed out and commented on my original post. I rediscovered the document that I’d uploaded onto Slideshare. I’m including it here as a footnote, to reflect the fear of reprisals that was prevalent in the minds of most back then.

NB 2: This post was recovered thanks to The Wayback Machine. I had lost the original content when my old blog on the same domain had gotten hacked. Over the years, it became apparent that the post had helped other scholars to think through their own journeys. I’m restoring the article to its rightful place.