Course Week 3c Study Notes The Relative Roles of BGS 2024-2025.pdf

The Lee Kong Chian School of Business Academic Year 2024-2025 Loo Khee Sheng The Relative Roles of the Government, Business and Societal Groups...

The Lee Kong Chian School of Business Academic Year 2024-2025 Loo Khee Sheng The Relative Roles of the Government, Business and Societal Groups PART A: INTRODUCTION In this note we will look at the relative roles played by the government, business and societal groups. We will look at the following: The roles of the government relative to business The roles of the government relative to societal groups The roles of business relative to societal groups We will end with brief remarks on the whole-of-nation approach. PART B: THE GOVERNMENT AS PROVIDER Should the state provide all goods and services to the exclusion of business? From the late 1920s to the early 1990s - a period that included the 1929 Great Stock Market Crash, the Great Depression of the 1930s, the Second World War of the 1940s, the launch of Sputnik 1 (the first artificial earth satellite) in 1957, Yuri Gagarin’s first space flight in 1961 and the space race of the 1960s - the socialist model, which severely restricted private businesses, was touted by some as a better model than capitalism, where private businesses dominate. The fall of the Berlin Wall in 1989, the collapse of the Soviet Union in the 1980s and 1990s and the failure and the abandonment of the socialist model by former socialist states, such as Russia, Eastern Europe and China, appear to have settled the issue in favour of the capitalist model. Presently, Cuba and North Korea  The Roles of the Government (Academic Year 2024-2025) are the 2 remaining socialist states which restrict private businesses but even they have steadily increased the roles played by private businesses. Cuba For nearly half a century Cuba has been run as a command economy, with the state controlling nearly all activities, but it has progressively increased the business sphere. In early 2011 "state barbers shops and beauty salons were handed over to their employees, who now work for themselves while paying rent, tax and social security to the state".1 The change is being extended to a wide range of small retail services, including shoe, watch and electronic repairs. In November 2011 Cuba announced a new property law allowing citizens and permanent residents to buy and sell real estate on various conditions. "For the first time since the early days of the revolution, buyers and sellers will be allowed to set home prices and move when they want. Transactions of various kinds, including sales, trades and gifts to relatives by Cubans who are emigrating, will no longer be subject to government approval…".2 At about the same time "the government published rules allowing Cubans to buy and sell used vehicles freely for the first time in half a century."3 From 1 January 2012 workers including carpenters, locksmiths, photographers and repairmen have been allowed to become self-employed. "They will be able to set their own prices, while paying taxes and leasing their premises from the state".4 As the case of Cuba shows, no state attempts to curtail private businesses altogether, unlike the former socialist states. A command economy with little private businesses generally has less economic activity. The people on average tend to be poorer but certain provisions of the state may be better or more equitable than a non-command economy. For example, Cuba has good healthcare and education, arguably even better than the US on some scores. PART C: THE BOUNDARY BETWEEN PUBLIC AND PRIVATE 1 "Cuba expands free-market reform," BBC News, 26 December 2011. 2 Damien Cave, "Cuba to Allow Buying and Selling of Property, With Few Restrictions," New York Times, 3 November 2011, accessed on 20 July 2012. 3 Victoria Burnett, "Relenting on Car Sales, Cuba Turns Notorious Clunkers Into Gold," New York Times, 5 November 2011, accessed on 20 July 2012. 4 "Cuba expands free-market reform," BBC News, 26 December 2011. 2  The Roles of the Government (Academic Year 2024-2025) PART C1: Different Economic Roles As discussed above, if government should not provide all goods and services to the exclusion of business, which sectors should be operated by the government and which sectors should be operated by businesses? Leaving aside governance (which is typically performed by governments rather than businesses, as discussed above) what other sectors should be operated by business? In some countries, like the U.S., business operates many more sectors relative to the government. These countries have relatively less government ownership of business and provision of goods and services. They adopt a more liberal economy emphasising free market and laissez-faire policies. In the USA even the powerful US Federal Reserve Banks are private corporations whose stocks are owned by commercial banks and not the government. On the other hand, some countries, such as China and France, have relatively higher state ownership and greater government involvement in the provision of goods and services. This is referred to as State Capitalism. They believe that the state should have command of the economy (its commanding heights), such as strategic sectors, natural monopolies and sectors with limited competition. What are considered strategic sectors have changed from time to time and from place to place and have included the following:- Defence industries Transport, such as airlines, automobile, trains Infrastructure and utilities, such as ports, airports, water supply, electricity Production and manufacturing, such as steel, metals and shipbuilding Energy, such as oil, gas, electricity, coal Communications, such as telecommunications, post and the media Certain Goods, such as food and dairy products Finance and trade, such as banks, insurance, export agencies At one time the UK government even owned travel agents and a removal company called Pickfords. In China salt was a state monopoly for 2,600 years until 1 January 2017.5 Such higher involvement by the government has also been referred to under different names such as “Bolivarian” and “economic planning”. 5 Johan Nylander, "A brief history of Chinese salt, the world’s oldest monopoly," AsiaTimes, 4 January 2017. 3  The Roles of the Government (Academic Year 2024-2025) PART C2: Arguments for the Government The arguments put forward for certain sectors to be operated by the government and not business include the following:- Control and Accountability The government should operate a sector when control and accountability are important. Such control should reside with the elected leaders and not business. The government is more accountable to the public whereas business cares more for its own interests and will abuse the power that comes with it. Examples include the provision of peace, security, defence, governance, law and order and the administration of justice. Control of Strategic Sectors The government should operate a sector when business failure will be too costly for society. Such failure consequently will affect the reputation of the government. For example, society suffers when the train services were disrupted. Even though the failure is due to business the government will still be responsible for it. Business operating such sectors can become too powerful and be sources of political patronage and influence. Control and Knowhow The government should operate a sector if the government risks losing its operational knowhow and capacity. Business granted today's contract may accumulate greater market power for tomorrow's contract. The government may become dependent on private expertise and be put in a disadvantaged position. Community and Societal Interests The government should control the sector when public interest requires it. The following are examples of sectors that the government should control:- Natural monopolies and sectors with little competition, such as the power grid and other networks The government is more concerned with delivering satisfactory service whereas business will be tempted to increase price or reduce the quality of service to boost its profits. For example, business running the train service may be tempted to cut down on needful maintenance to increase profits which ultimately affects the quality of the services. Sectors where price should not be determined by the market The government can reduce price for the goods and services to help the needy and the poor. Business will charge market price which the poor may not afford. 4  The Roles of the Government (Academic Year 2024-2025) Sectors at risk of relocating overseas Government control ensures that the operations stay to provide jobs for the people. Business on the other hand will relocate to a cheaper place. Sectors that are operated with a longer term view The government operates with a longer term view whereas business may adopt a shorter term mentality. This makes for more inferior planning for business. Sectors that are operated for societal interest The government operates for societal interest and not for profit. The government provides welfare, jobs and help for those in need. Another example is the news industry. The UK government has its British Broadcasting Corporation, the Australian government has its Australian Broadcasting Corporation and Singapore has its Mediacorp Pte Ltd. Capital, Cash and Catalyst The government should step in when business is not able to undertake it. This can be due to the lack of expertise, the high capital investments required, the high risks involved, the long gestation period required or the uncertainty over profitability. The government can also act as a catalyst for the sector. Large public and infrastructural works and research and development are sometimes undertaken by the government for these reasons. The internet and space exploration owe their origins to research undertaken and funded by the US government in their infancy. Business cannot fulfil the role as it does not have the capital to undertake it or is not interested in it because it is not profitable or too risky. Cost The government should control a sector if the government can operate it more cheaply. This in turn will result in cheaper goods and services. Business will incur expenses such as directors' fees and head office overheads. Business will also need to make profits for its owners. The Government does not have these expenses and does not need to make any profit. Further, the government may be able to finance the project more cheaply. Unless the government has bad credit ratings, it usually can borrow at a cheaper rate than business given its lower credit risk. Cost and Efficiency The government should operate a sector if the sector is integrated or connected with other government sectors. The government can operate all connected sectors as a whole more efficiently. If business operate the sector, it will be difficult for the government to co-ordinate the other sectors with the business sector. Business may operate the sector either on contract with the government or under regulations by the government. If business operates a sector on contractual terms, the government will have to renegotiate with business to change the terms of operation. This may be time consuming and costly. If 5  The Roles of the Government (Academic Year 2024-2025) business operates a sector under regulatory oversight, such oversight may be inferior to direct government ownership and operation. If the government operates the sector, it can change its operations as and when required. Cash and Profit The government should provide the goods and services when the profit should go into the pockets of the government rather than business. Why should these sure profits go to businessmen with their sports cars and mansions? The profits made should be kept by the state for the benefit of the people. Examples include betting (Singapore Pool) and the sale of alcohol. In Norway Vinmonopolet (the Wine Monopoly), a government-owned alcoholic beverage retailer, is the only company allowed to sell beverages containing alcohol content higher than 4.75%. Similar arguments have been advanced in respect of public utilities and natural monopolies. PART C3: Arguments for Business Conversely, arguments for certain sectors to be operated by business rather than the government include the following:- Competition Business is subject to the discipline of the marketplace. Businesses compete among themselves, driving up efficiency, innovation and quality. Weak businesses will fail and drop out of the competition leaving the stronger ones to continue. Government, on the other hand, wants to avoid the discipline of the marketplace and can stifle competition through regulation and policy making. The government may be tempted to enact rules to maintain the status quo, create artificial barriers of entry, restrict the operations of other competitors or give preferential treatment to government-owned operations. It is less easy for business to stifle competition. Even if a business dominates the competition or is a monopoly, the government can regulate it. It is more difficult for the government to regulate itself. Government can be less stringent on its own government owned companies. A government monopoly is also not immune to the temptation to increase prices and provide substandard goods and services. Democracy may be an ineffective control of the government. It is easier for the government to regulate business than for the government to regulate itself. Competition (continued) Each jurisdiction usually has only one government but it has many businesses. Business entities can take more small bets in the marketplace. The unsuccessful bets are discontinued leaving the successful ones to continue. This leads to more trial and errors which ultimately result in more 6  The Roles of the Government (Academic Year 2024-2025) successful innovations. The government, on the other hand, takes big bets and lack the variety offered by business. Consumer Choice Competition allows for greater consumer choice. A business can offer a product with specifications different from those of the competitors. If the government operates a sector, the choices available are usually limited. They may also adopt the take it or leave it attitude. Further, competition means that goods and services that are not in demand will ultimately be removed from the marketplace while goods and services that are in demand will be made more readily available. If the government provides the goods and services, the public may have no choice but to accept outdated or less suitable goods and services or on less suitable terms. Country Business is independent of the government. Business can operate overseas while the government may not be able to do so. By allowing a business to operate successfully in the country it can later expand overseas bringing profits back home. An army may not be able to operate in a foreign country but a private security contractor may do so. The government may not be able to invest in a foreign country but a business may. Capital Business can start a venture more easily than the government. It may be easier for an entrepreneur to risk private capital than for the government to risk public funds. Business will also be careful when investing its capital as any capital loss will be suffered by the business. Public officeholders and public servants may be less careful as the capital does not belong to them. Business can also discontinue unprofitable or unsuccessful operations faster in order to limit the capital loss. The government, on the other hand, may not be as flexible or may lack the discipline to do so or may feel the pressure to continue its uneconomical or unsuccessful projects to save face or to placate vested interests. Such government projects become wasteful and benefit only a few people. Yet, it is easy to justify government programs and difficult to assess the benefits of government programs on grounds of public interest. Those with vested interests clamour for their continuation as they do not have to pay for them, while the public and tax payers end up financing them. Capital Business lightens the load of the government. A government may not have the resources to invest in all the infrastructures it needs. Business involvement means the use of private capital to pay for infrastructural expenditures. Cost and Efficiency Business has the expertise to be efficient. Business is less bureaucratic and tends to operate as cheaply as possible. At the same time competition acts as a control over how much profits a business can make. 7  The Roles of the Government (Academic Year 2024-2025) Business that seeks to increase its profits by raising prices becomes less competitive than business with lower prices. Hence, competition drives down prices. The government, on the other hand, is bureaucratic. The department may be staff with political appointees who are incompetent or indifferent. Being bloated and less efficient the goods and services become more costly. Business expertise may also be due to its proprietary know-how. The government may not have the relevant expertise. Business expertise may also be due to its international scope and greater scale. A business that operates in, say, 30 countries will accumulate more expertise than a government that operates only in one country. Even a natural monopoly should be owned by business as it gains its superior market position because of its expertise. Government-owned entities are treated as sources of political influence and patronage. The government-owned entities can operate for the benefit of the government such as providing funds to the government and government officeholders. Cost and Efficiency Business is not burdened with public objectives that may cause it to be inefficient. Government-owned entities, on the other hand, may be saddled with public considerations causing them to be inefficient. Employment and remuneration of managers and workers, operational and business matters and the provision and pricing of goods and services may be decided on political, not economic, considerations. Government-owned entities may be overstaffed or appointed based on political ties rather than expertise. These make government- owned entities inefficient. For example, in May 2011 the Chinese Government ordered its state-owned utility companies to increase their electricity production while simultaneously controlling the price, despite the high price of coal. In response the utility companies defied the Government economic planners by deliberately reducing the amount of electricity they produce.6 Cost and Profit Business is incentivised by profit to work hard, be innovative and to take risks. A businessman may forego sleep, travel to far flung places and wade into danger to make money. The government, on the other hand, is bureaucratic and does not have a risk-taking culture. Government servants usually have a fixed pay scale. As pay is fixed, there is an incentive to do less work (as they are paid the same whether they work more or less). Consequently, government servants are not incentivised by how much profit the government makes. Community and Societal Interests Business can engage in charity and corporate social responsibility and provide for society and the community. The government may not be so responsive or resourceful as business. When Hurricane Katrina struck the US Gulf Coast, Walmart was on the front lines of the response. 6 Keith Bradsher, "China Utilities Cut Energy Production, Defying Beijing," The New York Times, 24 May 2011. 8  The Roles of the Government (Academic Year 2024-2025) Walmart opened make-shift stores, provided supplies to the affected and activated workers to help those in need. PART C4: How the government should provide If the government should provide the goods and services, it can be done through government bodies such as the ministries, statutory boards, government owned companies or other public bodies such as schools and hospitals. Government owned companies or state-owned enterprises (SOEs) are commonly referred to as Government-Linked Companies (GLCs) in Singapore. A GLC can be controlled, either fully or partially, by ownership of the GLC, either fully or partly, by contract or by law. The government can provide the goods and services without a fee (such as public parks and walkways) or for a fee (Gardens by the Bay). Some fees are fixed, such as passport fees. Sometimes the fee is determined by the market.7 The Singapore government provides COEs through competitive biddings, land parcels through competitive tenders and telecommunication spectrums through auctions. Sometimes the fee is subsidised. Singapore public housing is provided based on the size of the flat and eligibility and is generally cheaper than private housing. Examples of sectors operated by the Singapore government (which for our purposes includes government owned companies) include the following:- the operations of Changi Airport by the Changi Airport Group (Singapore) Pte Ltd, which is wholly owned by the government. The government stepped in to partly fund the expansion of Changi Airport, which includes the construction of Terminal 5. the operations of Singapore's ports by PSA International Pte Ltd, which is wholly owned by the government. the national broadcaster, Mediacorp, which is wholly owned by the government. Mediacorp is expected to discharge its social obligations and not merely achieve commercial success. Its role is to help bring the whole nation together. It includes the production of programmes that celebrate Singapore's culture 7 Thomas, John W., Using Markets to Govern Better in Singapore (August 2001). KSG Working Paper No. RWP02-010. Available at SSRN: http://ssrn.com/abstract=310862 or http://dx.doi.org/10.2139/ssrn.310862 9  The Roles of the Government (Academic Year 2024-2025) and heritage, reflect Singapore's society and values and educate, inform and entertain its audiences.8 PART C5: How Business Should Provide If the government decides that a sector should be operated by business, the government needs to consider the number, nature and type of businesses that should operate it, which in turn will affect its market structure. Few or Many Should one, a few or many businesses operate in the sector? Sometimes the government allows only a monopoly to operate in the sector. This may be desirable when there are scale and network advantages to be gained. We have discussed above the arguments for and against business ownership of monopolies. In Singapore, monopolistic or near monopolistic sectors operated by business include:- SGX, the sole stock exchange in Singapore. BG Group, the exclusive gas aggregator in Singapore, where it contracted to supply gas and underwrite the development of an LNG import infrastructure for up to 20 years or the 1st 3 mtpa of LNG. As at July 2020 Singapore LNG Corporation Pte Ltd is the only LNG Terminal Operator licensed by the Energy Market Authority. The government sometimes limits a sector to only 2 players, called a duopoly. Singapore has 2 casinos. Minister Mentor Lee Kuan Yew had expressed his personal preference that the 3 local banks, namely, OCBC, UOB and DBS, be consolidated into 2.9 The public bus sector had only 2 operators, SBS and SMRT, before the government adopted the contractual model to introduce more players into the market. Singapore had 3 mobile operators (Singtel, M1 and Starhub)(triopoly) until TPG Telecom won the bid to be Singapore's fourth mobile operator. 8 "PM Lee Hsien Loong at opening of Mediacorp Campus at Mediapolis@one-north on 8 December 2015" accessed from http://www.pmo.gov.sg/mediacentre/pm-lee-hsien-loong-opening-mediacorps- new-campus-mediapolisone-north-8-december-2015 on 21 July 2016. 9 MAS, however, clarified that Mr Lee was only expressing his personal view and not official policy. Dow Jones NewsWire, "Singapore MAS: Cannot Dictate Number Of Local Banks," 30 June 2010. 10  The Roles of the Government (Academic Year 2024-2025) A state of limited competition, in which a market is shared by a small number of producers or sellers is called an oligopoly. Limiting the number of operators can be done by way of licensing. Examples include financial institutions, professionals and taxi operators. Licensing may not be welcome by those who seek to be licensed or who could not obtain the license but it may be supported by those already licensed as it can exclude and reduce potential competitors. Big or Small Should a few large businesses or many small businesses operate in the sector? Some countries allow a few big businesses to dominate certain sectors while some countries actively curtail the power of big business groups. In the U.S. the law forbids the abuse of one’s dominant position and restricts arrangements, tie-ups, collaborations and mergers which restrict competition. In Taiwan small and medium size enterprises dominate. Germany has its Mittelstands, which are small and medium-sized enterprises, credited for its growth. Previously, in the U.S., Standard Oil Trust, which is a network of oil companies, used to control 90% of the American refineries. It was led by a board of trustees, through which Rockefeller owned more than one-third of the Trust. It was eventually broken up by the Supreme Court. The advantage of big businesses is the personnel and resources they have to compete and innovate, especially in capital heavy ventures. The disadvantage of big businesses is the adverse effects of their dominance over smaller rivals. The advantage of smaller businesses is the speed with which they can change but they may lack the personnel and resources required. Stand Alone, Conglomerate or Networks Should a business be allowed to operate different types of businesses under the same ownership? Singapore lawyers are not allowed to operate certain businesses while practising law. In Singapore local banking groups must segregate their financial and non- financial activities, and unwind the cross-shareholdings between the two. A related issue is whether different types of businesses should be allowed to form networks or operate in groups. In some countries conglomerates are welcome: 11  The Roles of the Government (Academic Year 2024-2025) German banks own substantial equity in industrial groups, such as Daimler-Benz or Thyssen. South Korea has its chaebols,10 such as Samsung and Hyundai, which have diverse types of businesses under the same ownership. Japan has its pre-war zaibatsus and the post-war keiretsus. Each major keiretsu consists of various companies and a main bank linked together through cross- shareholdings and contractual relationships to provide support, business and capital to the members in the group. Singapore has Temasek which owns partially many listed companies (in particular companies listed on the SGX) and wholly or partially other non-listed companies. Sometimes it is necessary for clusters to operate together. The Singapore government actively promotes the formation of industrial clusters for these reasons, such as the petrochemical, bioscience and aeronautical clusters. Conglomerates and networks enjoy the advantages of big businesses discussed above. In addition, established businesses of a conglomerate can support its newer businesses. Similarly, stronger companies in a network can support its weaker members. When an industry is undergoing a slowdown, better performing businesses of the conglomerate can help their weaker sister companies. Such advantages may allow conglomerates and networks to take a longer strategic outlook. The arguments for separation include focusing on core competency, limiting the risk of contagion, minimising non-arms length transactions and increasing transparency. Naturally when a conglomerate is big and powerful, it attracts criticism from its competitors. In South Korea, non-family shareholders and non-chaebols are naturally critical of the chaebols and their controlling families. Types of business entities Should the operators be entities of a certain type? Should certain entities be preferred? Lawyers in Singapore can only operate in sole proprietorships, partnerships, LLPs and Law Corporations. In the past US investment bank operated as partnerships. After reform, investment banks, such as Goldman Sach, were transformed into corporations. NTUC Fairprice, a co-operative, is sometimes favoured by the government compared to other supermarkets. Certain legal entities are given tax advantages. S-REITS and Master 10 Korean: 재벌, from chae "wealth or property" + bol "faction or clan" 12  The Roles of the Government (Academic Year 2024-2025) Limited Partnerships are not taxed at the entity level if most profits are paid to the owners and partners, where they are taxed. Foreign or Local Should foreign businesses be allowed to operate in the sector? The government may ban foreign businesses from sectors deemed sensitive and strategic. Singapore is relatively welcoming to foreign businesses although there are exceptions. For example, before July 1999 Singapore has a limit of 40% foreign ownership in local banks. South Korea has chosen to rely more on its domestic businesses, such as the chaebol conglomerates. China requires foreign companies to enter into joint ventures with local companies in some sectors if they wish to operate there. Should some locals be preferred over others? The Malaysian government has government schemes to favour Malays and other indigenous peoples (called Bumiputras) over other races. Restrictions or Liberalisation Some sectors may have more restrictions than others. The government may liberalise a sector when it thinks it prudent to do so. When the government liberalises a sector, the government may allow more players into the market or reduce the restrictions on the types of market players that can operate in it. In Singapore, sectors such as the banking, finance and insurance sectors have undergone some liberalisation. Recently, the Singapore government has decided to further liberalise the banking sector by issuing up to five new licences to digital banks.11 Mixed of forms In an economy a combination of the above is usually found. There may be monopolies, duopolies, triopolies, oligopolies, big and small businesses, stand-alone businesses and conglomerates, different business forms and local and foreign businesses all operating in their respective sectors. PART C6: Shifting Boundaries 11 Jamie Lee, “Singapore to issue up to 5 licences to digital banks in liberalisation push,” Straits Times, 28 June 2019. 13  The Roles of the Government (Academic Year 2024-2025) As the above arguments show, how large the role of business should be relative to the state is still controversial. The boundary between state and business is always shifting. There is continuing debate over which functions should be transferred from the government to business and which functions should be transferred from business to the government. An example of a debate of the transfer of governmental function to business is the proposal of some US lawmakers to increase the use of private contractors for screening operations in airports.12 Examples of debates of the transfer of business function to government are the proposal of the Singapore Workers Party to nationalise the transport sector and the proposal of the ElderShield Review Committee for the transfer of the administration of ElderShield from the 3 private insurers to the government. In the U.S. there was a proposal to nationalise the too-big-to-fail banks.13 Data seem to suggest that success of business ownership is mixed.14 For some, it does not matter whether the government or business is the owner. What are needed are strong long-term investment, strong management and sensible regulation.15 PART C7: How Government relinquishes or take on its roles If the government should relinquish its involvement in a sector, it can do so by privatising it. Conversely, if the government should assume the role, it can nationalise the sector. Singapore's telephone sector provides an example of how the roles were transferred between business and government.16 The telephone was first introduced in Singapore in 1879, three years after its inventor, Mr Graham Alexander Bell, patented his invention. It involved a trial on a telegraph line between Raffles Square and Tanjong Pagar led by Bennett Pell, manager of the Eastern Extension Telegraph Company. He started the first Private Telephone Exchange made up of a simple standard manual switchboard with 50 lines. In 1882 the Oriental Telephone and Electric Company (OTEC) bought over the exchange. 12 Susan Stellen, "Gatekeepers Under Scrutiny," The New York Times, 30 January 2012. 13 Gar Alperovitz, “Wall Street is Too Big to Regulate,” The New York Times, 22 July 2012. 14 Tim Harford, "The pendulum swings against privatisation," Financial Times, 29 September 2017. 15 Jonathan Ford and Gill Plimmer, "Returning the UK’s privatised services to the public," Financial Times, 26 February 2018. 16 "One hundred years of telephone service in Singapore," 1 April 1979, The Straits Times, Retrieved from NewspaperSG. 14  The Roles of the Government (Academic Year 2024-2025) Its public exchange had facilities for 60 lines but the lines were owned by the Imperial Government, the Colonial Government, the Municipality and OTEC. By 1907 the number of telephone exchange lines reached 1,000. In 1916 the whole of the government telephone lines was handed over to OTEC. In April 1946, after the Japanese Occupation, the military authorities handed back the system to OTEC. However, OTEC had difficulty meeting demand. On 1 January 1955 the government acquired the telephone network from OTEC. The Singapore Telephone Board (STB) was established as a statutory board to operate the national telephone service that included service to Peninsular Malaysia. This marked the end of over 70 years (since 1879) of the provision of telephone services by a private enterprise. International telecommunication service, however, was then operated by the Telecommunication Department, a department in a ministry. On 1 April 1972 the department was converted into the Telecommunication Authority of Singapore (TAS), a statutory board. On 1 April 1974 TAS (which operated the international service) and STB (which operated the national service) were merged into a single statutory board known as Telecommunication Authority of Singapore (Telecoms). On 1 April 1992, the telecommunications aspect of Telecoms was corporatised as a private company called Singapore Telecommunications Private Limited. In October 1993 it was converted into a public company, Singapore Telecommunications Limited (Singapore Telecom or Singtel). On November 1993 Singtel was listed on the Stock Exchange of Singapore (Singapore Exchange or SGX). As Singapore's telephone sector shows, the service alternated between the private sector and the government. Telephone service had been provided by a ministerial department, a statutory board, a private company and a public company. Below is a table showing the stages of privatisation and nationalisation. 15  The Roles of the Government (Academic Year 2024-2025) From Public to Private Corporatisation Corporatisation Privatisation Government Government Ministry/ Statutory Owned Private Department Board Company Companies Departmentalisation Decorporatisation Nationalisation From Private to Public PART D: A THIRD WAY: INVOLVING BOTH THE GOVERNMENT AND BUSINESS PART D1: Competition and Co-operation Instead of leaving a sector to the government or business solely, the sector can be operated by both the government and business at the same time. They can do so competitively or co-operatively. PART D2: Competitively 16  The Roles of the Government (Academic Year 2024-2025) Government and business can both provide the goods and services in competition with one another. The competition can vary in intensity depending on the sector. The government may want to compete with business to share in the profits, to dilute the power of the private sector, to provide cheaper alternatives, to fill the supply shortage (for example to the poorer members of society) or to learn from the operations. In Singapore DBS Bank (a government-linked company) compete with private banks. The Singapore government has started a few kindergartens and nursing homes to learn best practices. HDB provides public housing which dilutes the power of private developers. Private businesses can be disadvantaged when competing with SOEs. SOEs can have greater access to capital and other governmental help and preferential treatment.17 PART D3: Co-operatively Government and business can provide the goods and services co-operatively. Government and business can enter into an arrangement to provide goods and services together. There are a few ways to do this. Joint Venture The co-operative arrangement can take the form of a joint venture between the government and business. The government and business both own the business entity and lend their respective contributions to the venture. Government ownership in the joint venture can be major or minor. Through its ownership the government can exercise some control over the business (for example to pursue public goals). Drawbacks include the possible conflict of interests and the difficulty in restructuring a co-owned company when their interests differ over time. A number of listed companies are owned partly by the Singapore government and partly by the private sector. Contractual The co-operative arrangement can take the form of a contractual relationship between the government and business. The contractual arrangement can range from the relatively simple to the rather elaborate. The contractual arrangement can be a simple supply of goods and services to the government. The government in turn supplies them to the public. The armed forces canteens are usually managed by private operators. The army's outdoor firing ranges are run by businesses.18 Construction of government buildings is typically undertaken by private construction companies. 17 David Barboza, “Entrepreneur’s Rival in China,” The New York Times, 7 December 2011. 18 Jermyn Chow, "Civilians to run SAF firing ranges," Straits Times, 7 May 2010. 17  The Roles of the Government (Academic Year 2024-2025) More elaborate contractual arrangements include the contracting model of the public bus sector. In May 2015 the Singapore government awarded to Tower Transit Group Limited, a private company, the contract for the operation of the new Bulim Bus Depot and 26 bus services from the Jurong East, Bukit Batok and Clementi Bus Interchanges. Tower Transit will get an estimated total fee of $556.0 million over a five-year contract period.19 The Singapore government recently announced a new contracting model for the North- South, East-West and Circle MRT lines as well as the Bukit Panjang LRT Line. The assets will be owned by the government while SMRT will operate the lines. Revenue will be shared between the government and SMRT. Public Private Partnership Where the contractual relationship between the government and business becomes more involved, the co-operative arrangement can take the form of a “public private partnership” (PPP) between the government and business. In the UK it is also referred to as Private Finance Initiative. In a PPP arrangement business (as opposed to the government) builds, owns, finances or operates a project. The goods and services can be supplied to the government or the public directly, while payment can be made by the government or the users directly. The project can be operated by the business for a number of years and thereafter handed to the government, with or without a fee, or it can be retained by the business indefinitely. Take the example of a prison facility. A prison is normally built, owned, financed and operated by the government. The government then interns and takes care of the prisoners in the prison. In a PPP, the prison can be built, owned, financed and operated by a business (as opposed to the government). The government sends the prisoners to the prison and pays the business to intern and take care of the prisoners. The government does not have to build or operate the prison as these are done by the business. The government pays the business to do so and the business hopes to make a profit from the payments after deducting its expenses. The government also needs to regulate the business and prison to ensure that the business operates the prison and performs its duties and responsibilities properly. After the business has operated the prison for a number of years, the prison may be handed to the government or it may be retained by business indefinitely, depending on the contractual arrangement. Another example is a toll road. Under a PPP arrangement a toll road built and operated by business (as opposed to the government) can be used by the road users who in turn pay the toll charges to the operator directly. The government does not have to build and operate the road or spend money doing so, concentrating on regulating the operations of the toll road. The road users pay for the use of the road while the business hopes to make a profit from the toll collected after deducting its expenses. After the business has operated the toll road for a number of years, the toll road may be handed to the 19 LTA News Release, "LTA Awards First Tendered Bus Package To Tower Transit Group Limited," 8 May 2015. 18  The Roles of the Government (Academic Year 2024-2025) government or it may be retained by business indefinitely, depending on the contractual arrangement. PPPs have been used for the provision of utilities, infrastructure and buildings, such as rails, hospitals and public utilities. PPPs attempt to harness the regulatory strengths of the public sector and the efficiency of the private sector. Examples of Singapore PPP projects are the Tuas desalination plant and the NEWater plant.20 Assigning of Roles The co-operative arrangement can take the form of the parcelling of roles. A particular sector can be divided up into various parts with the respective parts assigned to the government and business, respectively. The supply of electricity in Singapore is a sector with both government and business involvement. Generation of electricity is undertaken by businesses which compete with one another to generate and provide electricity at competitive prices. The grid which transmits the electricity is owned by the government as a natural monopoly. The supply of electricity to consumers is undertaken by Power Supply, a government owned company, and other private companies competitively. PART D4: Success or Failure Whether a co-operative arrangement succeeds or fails depends on the parties involved, the arrangements between them and the circumstances and environment. When a co-operative arrangement is successful, goods and services are provided at reasonable prices efficiently under effective governmental supervision or regulation. On the other hand, when a co- operative arrangement fails, goods and services are provided at unreasonable prices or inefficiently, while the government fails in its supervision or regulation. PART E: VARIATIONS AND PERMUTATIONS As the discussions above show, there are many ways to structure a sector. Take for example the train services: The government can own the land, rails and trains, employ the staff and operate the train services (as in Singapore when the MRT first started). 20 Patricia Lam, "Public Private Partnership and the Search for Value," Ethos, Vol. 10, Issue 2 (July 2004) , http://www.cscollege.gov.sg/cgl/EthosPast/04Jul/04Public.pdf 19  The Roles of the Government (Academic Year 2024-2025) The government can own the land, rails and trains while business operates the train services. The train services can all be operated by one business or they can be operated by different businesses (as in Singapore presently). The government can own the land and rails while business owns the trains and operates the train services. The train services can all be operated by one business or it can be operated by different businesses (as in the UK). The government can own the land while business owns the rails and trains and operates the train services. The train services can all be operated by one business or it can be operated by different businesses (as in Singapore after privatisation). Business or businesses own the land or part of the land (such as the stations), rails and trains and operate the train services. The entity owning the assets or operating the train services can also be a company with mixed government and business ownership. Even markets for common commodities can be structured differently. The government can always take over the provision of the goods and services and monopolise the trade. Examples are China's salt monopoly and Norway's liquor monopoly discussed above. In Singapore before casinos were allowed to operate, legal betting is operated by government bodies. In 1985 the Malaysian government attempted to monopolise the trade of mandarin oranges. PART F: HOW SHOULD THE GOVERNMENT RELATE TO BUSINESS? PART F1: The Environment of Business: Soft and Hard Infrastructure If business should operate a sector, how should the government relate to business? We will look, firstly, at how government can support the business, followed by how government can regulate the business. Business needs a good environment in which to operate efficiently. Governments friendly to business seek to create an environment that is conducive to business. This requires both good hard infrastructure and soft infrastructure. It includes:- 20  The Roles of the Government (Academic Year 2024-2025) Peace and security from internal and external threats and proper control for the entry and exit of goods, services, capital and labour Good physical infrastructure, amenities and support services and industries Good financial, economic, fiscal and legal frameworks Good healthcare, educational facilities, human capital and expertise Suitable social, cultural and ideological backdrop To this end, Singapore, one of the freest economies in the world, has virtually no import tariff, exchange restrictions, price ceiling, minimum wage and rent control. On the other hand, bureaucracy, red-tape, corruption and uncertainty have the opposite effect. To create an environment conducive to business, governments have to legitimise capitalism in the face of its inherent inequality and economic harshness. Welfare states help those who do not fare as well in the marketplace. It subsidises the education, housing and wages of the poor to incentivise the poor to work within the system and not sabotage it. Governments also seek to stabilise the market in times of market failure. For example, during the 2008 credit crisis the supply of credit (the giving of loans) and the price of credit (interest rate) were affected. The Singapore Government stepped in by facilitating loans through financial intermediaries. PART F2: More Direct Support for Business Besides the hard and soft infrastructure, governments also provide more direct support to business. Government can do so in various ways including the following:- The government can serve as a customer to purchase goods and services from business. For example, HDB leased from Sunseap Enterprises Pte Ltd 2 mega- watt-peak solar photovoltaic systems for 45 HDB residential blocks in Punggol, the first solar leasing project in Singapore.21 The government can serve as a provider of capital through equity, loans and subsidies. The help can also come in the form of a reduction in taxes and other expenses. The government can serve as a protector of business by endorsing a business monopoly or by restricting competition in favour of certain businesses. 21 HDB, "First Solar Leasing Project in Singapore," http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/6B313D60012ADD5D4825790C002DC8A1? OpenDocument accessed on 20 July 2012. 21  The Roles of the Government (Academic Year 2024-2025) The government can serve as an enabler by providing information, know-how, research, personnel, contacts and networks. Many of the innovations that business exploits originate from the research and development funded by or undertaken by the state (eg. the internet, space technology, GPS, etc). The government can serve as a partner by entering into public-private partnership with business. The government can serve as a diplomat to assist businesses’ expansion abroad. The government acts as a powerful negotiator to open foreign markets to local businesses and lobbies and protects them when operating there. Through regulation the government can create a market for players to operate in. The government can create standards and platforms. For example, the widely adopted GSM standard allows for economies of scale.22 Regulations can also create a level playing field which fosters competition. They provide assurances about the safety and effectiveness of goods and services. On the other hand, regulations can curtail competition. Regulation can also favour some to the detriment of the rest. A business-friendly government can tilt the playing field in favour of business while a business hostile government can tilt the playing field in favour of workers and non-business interests. Regulations can create barriers of entry to new comers or new types of operations (such as taxis versus Grab and hotels versus Airbnb). Regulations can allow business to capture extra profits, a form of rent seeking. Some governments actively support certain businessmen resulting in an uneven level playing field. South Korea supported the chaebols of certain business families. It is natural for those left out to criticise them. Business sometimes appeals to the government to curtail its competitors. When Microsoft became dominant in software, many competitors asked the US and EU antitrust authorities to curtail Microsoft. Later, when Google became dominant in search, many competitors, including Microsoft, asked the EU antitrust authority to curtail Google.23 PART F3: Industrial Policies Some governments actively implement industrial policies and work closely with business to build up the country's industries. Industry policies favour certain industries and 22 Diane Coyle, "Three Cheers for Regulation," Project Syndicate, 17 July 2018. 23 “Antitrust Cry From Microsoft,” The New York Times, 31 March 2011. 22  The Roles of the Government (Academic Year 2024-2025) disfavours others. Industrial policy may enable industries that would not have taken off otherwise. This is important in strategic industries. Internet, defence and commercial space businesses all come about because of prior US government's funding and efforts in the area. An industrial policy, however, can back the wrong industry leading to inefficiencies and harm to other viable industries. It may create vested interests, making it difficult to change course when it has proven counterproductive. Industrial policy can also be inefficient if there is no appropriate ways to measure its returns. PART F4: Regulating Business With regard to regulation over business, the "visible hand" of the state intervenes in the "invisible hand" of the market. A government has to decide whether to adopt a laissez- faire approach (French for “let do", "let it be", or "leave it alone") or a more regulated environment. When there is too much regulations or when the regulations are no longer suitable, the government can deregulate the sector by reducing or removing the excess regulation. Many governments have deregulated the telecommunication, transport, airline, port, health and other sectors. The Singapore Pan El crisis,24 the U.S. Financial crisis and other economic crises have shown that regulations are necessary for the proper functioning of markets. The issue is not whether regulation is required or not but whether proper regulation are in place. Proper regulation should achieve its intended aim and benefit without imposing too much cost and burden to be counterproductive. Some have argued that the benefits of regulation should outweigh the cost and burden of regulation (the cost-benefit approach). Some have argued that the aim of regulation should be moral (the moral approach) or reasonable (the reasonable man approach). In the financial sector, Singapore has been shifting towards a risk-based approach. MAS imposes healthy prudential standards and evaluates the relative risk posed by each financial institution. A financial institution that potentially has the largest impact on the financial system is subjected to the greatest supervisory intensity.25 Another approach is the regulatory sandbox approach. It seeks to enable the relevant businesses to experiment with innovative financial products and services with appropriate safeguards within a well-defined space and duration (for example, cryptocurrency). 24 “Case Study On Pan-Electric Crisis,” Monetary Authority of Singapore, June 2004 http://www.mas.gov.sg/publications/staff_papers/MAS_Staff_Paper_No32_Jul_2004.html. 25 Ravi Menon, "Markets and Government: Striking a balance in Singapore," http://www.cscollege.gov.sg/cpe/images/PS%20Ravi%20Menon%20Opening%20Address.pdf 23  The Roles of the Government (Academic Year 2024-2025) PART F5: Market Failure Business regulation is important because business can abuse or harm other parties or can be abused or harmed by others. Some noteworthy situations where regulation is called for include the following: When a business is dominant because of its monopoly power (such as Microsoft) or its size and reach (such as a conglomerate). Where a natural monopoly or market power occurs, such as the power grid, gas network or cable network, the government needs to regulate the entity providing the goods and services to stop it from abusing its market power. When a business is too big too fail and can cause systemic risk to the economy. When a business has information which the other parties do not (for example in the sale of technical products). When a business creates negative externalities (such as pollution). Regulation is also important in situations where a rational action done individually can lead to an irrational result done collectively. This is known as the “tragedy of the commons”. It is rational for a fisherman to fish as many fishes as he can sell but irrational when all fishermen do so, as their actions can result in the depletion of the fish stock. Global pollution and deforestation are further examples of the tragedy of the commons. PART F6: Hostility to Business On the other hand, governments that are hostile to business can do the opposite by creating an environment that is restrictive to business. These governments attempt to control business through various means, such as fixing the price of goods and services, increasing taxes and levies,26 favouring state entities over private business and burdening business with heavy regulations. 26 for example in the late 1970s, the Indian government raised income tax levies to a maximum of 97.5% 24  The Roles of the Government (Academic Year 2024-2025) An example of a country that is less friendly to business is Venezuela. In Venezuela27 even the smallest purchases require identification. A customer needs to give his or her identification when buying a carton of milk in the local store. Bank cash machines have strict daily limits on cash withdrawals. Documents are sometimes required to show the source of money deposited into a bank account. Taking out money over the bank counter requires 2 signatures, fingerprints and sometimes a photograph. An importer has to go through roughly 40 different steps to get clearance for a container of goods. There are also tight currency controls in place. President Hugo Chavez had nationalised dozens of companies and expropriated tens of thousands of hectares of land after coming to power in 1999. Tight regulation of business can lead to black markets (where business is conducted illegally) and grey markets (business conducted through unauthorised channels). PART G: GOVERNMENT AND THE NON-PROFIT SECTOR PART G1: Roles of the Non-Profit Sector We have so far discussed the role of government relative to business. We will now discuss the role of the government relative to the nonprofit entities. While the government can provide a lot for the people, not all goods and services can or, arguably, should be provided by the government. Some goods and services can and, arguably, should, be provided by the non-profit sector. In relation to the government, sometimes it may be better if a nonprofit entity assumes the role rather than the government. For example, The Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit organization (rather than the government), is responsible for coordinating the maintenance and procedures of several databases related to the name spaces and numerical spaces of the Internet. PART G2: Arguments for the roles of the Non-Profit Sector versus the Government 27 Sarah Grainger, "The challenges of doing business in Venezuela," BBC News, http://www.bbc.co.uk/news/world-us-canada-15486080 accessed on 20 July 2012. 25  The Roles of the Government (Academic Year 2024-2025) When should the government relinquish its role to non-profit entities? The following are some areas where non-profit entities may be more appropriate: Lightening the load of the Government. Programs may be funded or more cheaply administered by nonprofit entities. Citizens and non-profit organisations step in and donate their time and money out of the goodness of their hearts or due to their convictions and beliefs. This lightens the load of the government. Even when the program is government funded, the program may still be cheaper overall due to contributions from individuals and donations. Examples are charities, welfare homes and community hospitals. More effective programs. The program may be more effectively delivered by nonprofit entities. A nonprofit entity may have expertise that the government lacks. A large nonprofit entity operating globally and on a greater scale may accumulate more know-how and expertise than a government operating in one country. More flexible and varied programs. Nonprofit entities being relatively smaller and more autonomous can be more adaptable and flexible and have less bureaucracy and red tape. An example is ACRES which may be able to catch the snake while the government is divided over the jurisdiction of where the snake is presently at. Nonprofit entities, being more numerous, can also try more varied programs than the government. There are numerous nonprofit entities which can provide a variety of differentiated goods and services as opposed to the fewer government departments and bodies providing a relatively fewer range of goods and services. In 2012, the Hawker Centres Public Consultation Panel recommended that new hawker centres be managed on a not-for-profit basis by social enterprises or cooperatives.28 The first hawker centre so managed is the hawker centre at Ci Yuan Community Club under the management of Fei Siong Food Management.29 Fact sensitive. Government programs usually apply on a national scale according to the objectives of the programs. They do not give much discretion to the public servants to deviate from the programs. For example, a needy person may fall outside the group of intended beneficiaries of the government program even though he may be needier than the intended beneficiaries. For example, the government program may provide help to those with low monthly income, say, below S$800 a month, but a person earning more than S$800 will fall outside the government program but yet be needier than a person earning below S$800 a 28 Woo Sian Boon, "Social enterprises invited to submit proposals to manage hawker centres," Today, 4 January 2014. 29 Kelly Ng, "Foodfare to review price caps at hawker centre after getting flak," Today, 30 July 2015. 26  The Roles of the Government (Academic Year 2024-2025) month because he or she has sick parents to take care of. A nonprofit entity operating on a smaller scale can be more nuanced in its approach. More connected to the constituents. Nonprofit entities can form deeper ties with the constituents than the government. The constituents may also be more responsive to a nonprofit entity than the government. For example, a society helping the homeless explained to the Ministry that the homeless do not want a Government Minister to see them because the homeless fear that the Government will forcibly evict them to the homeless shelter. Another example is a person who is suicidal. He or she is afraid to seek help from the government because it is an offence to attempt suicide. He or she is more comfortable seeking help from a non-profit entity. No sense of entitlement. Government help may lead to a sense of entitlement. Nonprofit entities, on the other hand, can provide goods and services on a voluntary and discretionary basis. The Excluded. Government programs may be designed to favour certain constituencies to the exclusion and disadvantage of others. For example, the present HDB rules favour those who can form a family nucleus. Consequently, unwed mothers who cannot form a family nucleus may be excluded. Nonprofit entities can help those excluded from or underprovided by government programs. Neutrality. The government may take a neutral stand over matters such as religion and race. The respective races and religions are then served by their respective race-based and religious organisations. Examples of Singapore raced- based organisations include Chinese Development Assistance Council (CDAC), Mendaki, the Singapore Indian Development Association (SINDA) and the Eurasion Association. Examples of religious based organizations include the halfway houses which treat recovering drug addicts. Religion is seen to aid in the treatment. It would be difficult for the government to run them on that basis.30 The nonprofit entity may also have more moral and religious authority with its constituents than the government. Moderation and Middle ground. The government may also take a more moderate stand. The partisan groups can then contend for their more partisan views. For example, the government may take a moderate stand with regards to the environment or foreign workers. The partisan groups can then advocate their more partisan views with regards to these issues. 30 Laurence Lien, "Singapore's Non-Profit Sector: What Should its Role Be?," Ethos, Issue 10, Oct 2011. 27  The Roles of the Government (Academic Year 2024-2025) Independence from the government. Nonprofit entities should be allowed to pursue their interests without government involvement. Private individuals can be more motivated and enthusiastic over a certain issue or cause. Autonomy and independence can enhance self determination and dignity. Their independence can also allow them to serve as counterparties to the government by providing independent views and feedback. They can also lobby the government for policies. An example is the lobbying by various groups to change HDB rules that work against flat ownerships by unwed mothers. Taking an Opposite Stand. Some nonprofit entities may even resort to aggressive public pressure to change government policies. For example, a nonprofit entity and a lawyer helped and provided legal services to Parti Liyani, the domestic helper accused of stealing her employer family’s goods, in her defence against the charges preferred against her. The organisers of Red Dot are aggressive and vocal in lobbying the government to change its laws and policy. Some art groups are critical of the government. PART G3: Arguments against the role of the Non-Profit Sector versus the Government On the other hand, nonprofit entities may not be suitable for various reasons. Below are some examples. Risk of Harm. Nonprofit entities may cause more harm than good such as when they promote values that are contrary to the norm or are divisive or subversive. Lack of Money, Resources and Expertise. The nonprofit sector may lack the required money, resources and expertise. Government control and purposes. The government will want to perform the role when the government wants to have some form of control and not let it be under the control of nonprofit entities or individuals to achieve the purposes that the government wants to achieve. PART G4: Provision by the Government 28  The Roles of the Government (Academic Year 2024-2025) When the government provides the goods and services on a non-profitable basis, the government can provide the goods and services through the usual departments and statutory boards. The Singapore government has increasing used companies limited by guarantees to provide goods and services on a non-profit basis. Government provision Ministries and Companies Limited by Companies Limited by Statutory Board Shares Guarantee Examples of companies limited by guarantee that are linked to the government (as opposed to nongovernmental non-profit entities) are: Temasek Foundation Ltd (associated with Temasek) that provide various societal programs; SG Enable Ltd that provide programs for those with disabilities; The Singapore Centre for Social Enterprise, Raise Ltd that support social enterprises; and Kidstart Singapore Limited that provides support to young children from low- income families. A company limited by guarantee can operate more independently and commercially relative to the government, employ employees (rather than public servants), be registered as a charity and accept donations from the public (which may be more awkward for the government to receive). PART G5: Provision by Non-Profit Entities Non-profit entities that provide goods and services on a non-profit basis can be the usual societies, charities and foundations. The usual charities are also assisted by other charities and noncharitable organisations and individuals in the charity ecosystem. PART G6: Government and Non-Profit sector co-operation 29  The Roles of the Government (Academic Year 2024-2025) Instead of leaving a sector to the government or non-profit solely, the government and nonprofit can co-operate together. The government can provide funds to the non-profit entities for deployment by the nonprofit. The Singapore government has also established certain bodies to help nonprofit entities such as: The National Council of Social Service that provides its charity members with funding grants, networking, services, sector knowledge and branding expertise, among others. The National Volunteer and Philanthropy Centre that acts as a think tank and facilitator of charitable endeavours in Singapore. The Community Foundation of Singapore that raise funds for charities and facilitates private sector donations to charities. PART G7: Government and Non-Profit sector competition The government and nonprofit entities can compete with each other. For example, the nonprofit entity and government may perform the same roles in competition with each other (e.g. schooling). PART G8: How Should Government Relate to the Non-Profit Sector During the earlier decades of Singapore’s independence, the Singapore government had preferred a more restrictive role for the non-profit sector and exercised stricter oversight over it. The Singapore government has since gradually given more space and roles to the non-profit sector. The Singapore government has called for greater collaboration between the government, business and the nonprofit sector.31 PART G5: Regulating the Non-Profit Sector 31 Kenneth Cheng, "Better coordination 'key to improve help for community'," Today, 27 March 2017. 30  The Roles of the Government (Academic Year 2024-2025) Whatever the extent and nature of the roles played by the non-profit sector, regulation of the sector is important and necessary. The embezzlement and misuse of donated monies and the abuse by nonprofit groups of indigenous and other people groups are ready examples. PART H: RELATIVE ROLE OF BUSINESS AND SOCIETAL GROUPS PART H1: Arguments for and against the roles of business and the nonprofit sector Above, we have discussed the roles of the government relative to the roles of business, and the roles of the government relative to the roles of societal groups. We will now look at the relative roles of business and societal groups. First, business operates predominantly to make profits. Thus, business normally will not venture into any area where business thinks that no profit can be gained. It is for this reason that the poor are usually underserved and underprovided for. The non-profit areas are, consequently, usually served by either the government or non-profit entities or individuals. Conversely, where profits can be made, they are usually made by businesses rather than not-for-profit entities. While some not-for-profit entities do make profits by providing goods and services, the objective of the entities is usually not to give them to the owners or members as investment returns but to sustain or enhance the entities or members. Second, there are areas where the making of profits can be a sensitive topic. For example, making money from religious infrastructures and services can be viewed negatively by society. In July 2014 a site at Fernvale Link, Sengkang, Singapore, intended for the construction of a Chinese temple with an integrated commercial columbarium, was tendered out to Eternal Pure Land, a Singapore subsidiary of Life Corporation, an Australian-listed company. The public reacted strongly against the tender of the site to a purely commercial entity. The tender, although already awarded, was cancelled.32 In a new tender the land would only be awarded to a religious group.33 32 Lester Hio, " Re-tender called for temple and columbarium site in Sengkang's Fernvale Link," Straits Times, 7 May 2015. 33 Lester Hio, "New tender for Fernvale Link site: Only religious groups allowed this time round," My Paper, Jun 26, 2015. 31  The Roles of the Government (Academic Year 2024-2025) Third, there may be critical infrastructure and resources that should be controlled by non-profit entities rather than businesses. For example, ICANN, a not-for-profit public- benefit corporation, helps coordinate and support the unique addresses – the names or numbers – that identify the computers so that the computers know where to find each other across the world in the global internet. However, the nonprofit sector may not have the funds or sufficient to perform the roles discussed above. Properties, critical infrastructure and resources are costly, and it is not surprising that a lot of them end up being owned and controlled by businesses. PART H2: Business and Non-Profit sector co-operation Instead of leaving a sector to business or non-profit solely, business and nonprofit can co- operate together. An example is a collaboration between Standard Chartered Bank, Temasek Trust, and AWWA Ltd (a social service agency charity) called the Family Empowerment Programme to provide income stability for low-income families. The programme is based on an “Outcomes Amplifier model” a type of Pay-For-Success funding. Under the funding model, Standard Chartered Bank provided the first round of funding of S$750,000.00. If specific outcomes were met, Temasek Trust would fund a second round of the project with another S$750,000 to enable the refinement and expansion of the FEP to benefit more families.34 However, the co-operation between the business and the charity can raise issues. An example is the relationship between Walmart, the giant retailer, and the Walmart Foundation. The Walmart family set up Walmart Foundation as a charity. Walmart Foundation had been accused of making donations to reduce local opposition to the expansion of Walmart into some urban areas. They argue that this violated the terms of the Foundation's tax-exempt status by directly benefiting the business of Walmart, the business. PART H3: Business and Non-Profit sector competition Naturally, business and the nonprofit sector can compete with one another. They may vie to serve the same constituents on their own terms or may oppose each other. 34 https://temasektrust.org.sg/en/what-we-do/impact-hub/article-details/empowering-low-income- families-pay-for-success accessed on 30 July 2024. 32  The Roles of the Government (Academic Year 2024-2025) PART I: WHOLE-OF-NATION APPROACH Above, we have discussed the relative roles of the government, business and societal groups. On a more comprehensive level, a country or jurisdiction needs all its parts to function well together in order to grow and improve. In line with this, the Singapore government has emphasised the “whole-of-nation approach”. In the whole-of-nation approach the Singapore government seeks to “partner businesses, citizens, and other stakeholders to develop better solutions together” and “seek to bring everyone on board”. This will require the government to “communicate clearly and simply to the public” and “to actively reach out to others” and “hear their views”.35 In a whole-of-nation approach, the government, business and society aim to work together for the benefit of everyone. ΩΩΩ Loo Khee Sheng [email protected] Feedback is welcome. 35 “PSD's Addendum to President's Address - 9 May 2018,” https://www.psd.gov.sg/press-room/press- releases/psd-s-addendum-to-president-s-address---9-may-2018 (accessed on 31 July 2019). 33