government Archives

Active government

Mariana continues her tirade against government capture by capitalist in general. It is interesting how her lessons for government applies perhaps overall to organisations and businesses just as well. That the point of the economy is not the profits but the purpose of the activities themselves. In short run, going for the profits may work but in longer run, it is knowing what problems you want to solve and working on them effectively that brings about the profits.

For governments, that is perhaps the strongest point. But when it comes to corporates, I still think that it is natural for the capitalists to hijack the agenda of the government, lobby for the focus on growth and highlight all of the social benefits of economic growth so much so that government keeps staring that way. The dominance of the economic agenda and how the goals of societies have become caught up with the principle of growth is perhaps something we should be discussing and considering as a society.

In Singapore, how we want to grow our society next needs to be considered. I think the Forward SG initiative was attempting that exercise through the idea of (re)formulating our social compact yet all too often, the logic of resolving the issues seem to boil down to certain initiative, formation of committees or some kind of organisation to look into things. Maybe it is not about adding components? What if it’s about discarding some of our existing things? Including our emphasis on academic merit?

We ought not lose heart but keep the conversation going.

Tailpipe emissions

We moved to Sydney earlier this year and one of the main highways that the buses move on to get to our place in the suburbs is Parramatta Road. It was a highway leading into the western suburbs but now it is just a road – a relatively narrow one for the heavy traffic that goes through it.

I recall one morning when I walked along the road to get to the bus stop that gets me a bus to the city. There were heavy trucks going down the road, with large SUVs and smaller passenger vehicles as well. I didn’t recall tailpipe emissions bothering me that much back in Singapore – perhaps only the heat that the cars were emitting then. But I noticed how much the tailpipe emissions were stinking up the air even in Sydney where it was less humid than in Singapore and smells tend not to linger or stay strong in the air.

It did make me wonder what the roads would be like without those tailpipe emissions. And that’s probably the dream of those EV companies and the policymakers who are trying to push for more EVs on the roads. Singapore could have done that way earlier; given our ability to manage the vehicle population through COE. Moreover, Singapore already has one of the highest taxes on vehicles in the world. This means the population was ready to shell out the kind of money that an EV would cost.

It is a fine balance to strike given that there’s a lot more consideration around the readiness of our electricity network infrastructure to develop the charging capacities needed. There’s a lot of thinking around whether our vehicle refueling infrastructure is going to be disrupted – and how we can manage those disruptions. Sometimes we just want the transition to happen immediately and for all of us to gain access to the latest technology at reasonable costs. Singapore has done a good job juggling these difficulties and we can do more to explain the linkages between systems to allow us to pinpoint and put pressure on the bottlenecks.

Owning the problem statement

As you might tell, I’m back to in the mode of thinking about the nuances involved in problem solving. The reason is in part because I’ve been interviewing candidates for various roles in my company across four different offices in APAC. That forces me to start considering what are the attributes I value highly and what really demonstrate those attributes. Some of these are really so nuanced and difficult to really describe or pinned down – mostly uncovered through questioning and observing responses in various circumstances.

I am reminded to be grateful for the experience I gathered while working within the Singapore government as part of what was known as International Enterprise Singapore and also Infrastructure Asia. In both instances, I had to work across cultures in Asia which forced me to be sensitive about culture differences and made me pay more attention to the manner we can communicate better. It was also a very collaborative environment that involved a lot of coordination, across departments, government agencies, teams and across various levels. I had the opportunity to with ministers, very senior public servants and observed the way leaders approached problems and manage delicate situations.

And because early on in my career I dealt with a lot of issues where I had to own a problem statement without having the full solution to it but rather, coordinating and managing teams of people, often with different interests to get to the solution, I came to be comfortable with project management. It wasn’t something I had consciously picked up but it was emergent through the themes of various work I did.

Often, what earns us the right to serve our client as consultants is really the ability to take hold of, and own the problem statement that you’ve determined alongside your client. It is not the mastery of content or topic or expertise in particular subject matter. All of that should come along but there will always be someone better than you out there. The ability to take responsibility and do what you can to harness and gather the resources towards solving a problem is the more valuable attribute.

Bridge to the future

Having been based in Australia for two months now and getting a better view of the overall energy landscape, I’d say that the greatest hurdle we need to overcome is developing an alignment in commitment, plans and action to bring bioenergy especially biomethane into the system energy mix in order to decarbonise.

We are trying to build a bridge to the low-carbon energy future. And there has been many announcement, efforts and plans around hydrogen hubs, hydrogen parks. In the year 2023, the prices of electrolysers didn’t seem to come down all that much as expected, renewable electricity in the form of wind and solar, while being cheap, is bringing about a degree of intermittency that challenges grid operations to the extent that overall cost of electricity or at least access to electricity remains high. As it turns out, we were building the bridge from the destination towards us when we were working on the hydrogen projects. They were good, at some point in the future but it seems that they are not being built fast enough to reach us today. We are still unable to adopt those solutions.

This means that as the decarbonisation targets and emission reduction dreams comes back to bite us, we need to start building the bridge from our side. And biomethane is a great solution that allows us to do that. It displaces natural gas on a one-to-one basis and does not require end-users of natural gas to change their appliances. Biomethane can be spec-ed properly in the biogas upgrading process in order to achieve the quality required for gas grid injection. Moreover, the production of biogas (precursor to biomethane) can be done in conjunction with managing our organic and agricultural wastes which were either being burnt, composted openly or sent to the landfill – all of which involves some kind of carbon emission (albeit short-cycle to a certain extent) that does not achieve extra work done. And don’t get me started on the potential of biogenic carbon dioxide as a future market to build.

Lots of clear work and action. Once we get the perception right and eliminate the misinformation around bioenergy in Australia.

Greenwashing label

Is the whole notion of ESG disclosure a massive distraction? In 2021, Tariq Fancy of Blackrock called it a distraction for climate action. And I tend to agree because it tries to pass on the responsibility of climate action into the hands of the market, that had continually proved incapable of generating endogenous climate action. Sure, you need the market to scale solutions, and drive the expansion of some of the good things that will benefit the climate. But to think that the market can drive change just purely from the realisation of climate change as a problem is naive.

By leaving the type of climate action and the labelling of what counts as green to the market will simply generate greater confusion and inaction as we have seen from the proliferation of funds that tout sustainability or impact, or both and often still trying to pair that with financial returns, etc. The extra cost that goes into reporting, emissions accounting and massive resources around disclosure standards and all simply drives activities for the big consultancies without diverting energies towards the direction of climate action.

The issue is that greenwashing is real and pretty easy. And that can take the form of superficial disclosures that tosses buzzwords around. Yet there are corporates taking genuine action drowning in this sea of sustainability marketing and PR nonsense, being accused of greenwashing when they are trying to make a difference. If it was all going to boil down to rules, regulations and laws, then there won’t be ESG funds and non-ESG funds or government having to regulate disclosures. There won’t be accusations of greenwashing because you are either green or just illegal/non-compliant.

Regulation is of course a complex topic for another day but it has to be worked on. Regulating disclosure is unlikely to be enough.

Extracting surpluses

I spent many years focused on infrastructure development, particularly working on getting private sector involvement into infrastructure investments, executing the projects, operating and maintaining them for government. The advantage, as we would often tout, has a lot to do with the efficiency of getting private sector with experience to do it. At the same time, it reduces need to use direct state budget for financing such projects, and reduce the need for government to get involved in the complexities of hiring specialists, working on those technical subjects that will not support other areas of government work.

We called these infrastructure projects public-private partnerships or PPPs. It has somehow unlocked lots of private sector financing into the market and supported infrastructure investments. That is all good but it made me wonder whether marketization infrastructure is necessarily a good thing. For one, collecting fees on a piece of infrastructure in order to maintain it sounds right; and that fee will somehow have to be regulated since the private sector party would try to extract all the surplus with its monopoly position. So what should the regulator allow? Average cost pricing or marginal cost pricing? There is a ‘right answer’ in economics but in practice it is always hard to really work out what is the long run marginal cost involved. Particularly if the amount of service you render in each time period varies with demand.

And who is to prevent the monopoly from trying to extract more surpluses by pushing the regulator to allow it to charge certain prices by gaming the criteria or the measurement methodologies that the public sector develops. So the cat and mouse game starts. Is this what we expect when we try to marketize infrastructure? And should we not expect it when we do go ahead to privatise infrastructure? Eventually the tax payers have to fund both the cat and the mouse – the regulator and the monopoly or the private shareholders’ profits. Does that really make sense in terms of overall economic efficiency?

And finally, can such a set up really deal with change? Especially with the energy and climate transition. A lot of infrastructure need to build in resilience, consider the climate impacts on not just their infrastructure but also their customers and the way their demand base will be evolving, whether that is going to impact existing business models. All that is not even accounting for the decarbonisation ambitions of their customers. Meanwhile, can these all become an excuse for extracting further surpluses?

Green race II

There’s going to be a new kind of entrepreneurship; not necessarily one that is building businesses with an established revenue stream or for a current market need, but one that bets on the needs of a future that the world wants to be creating. And the upcoming green race might unleash this new breed of entrepreneur more strongly than before. In the post-pandemic era where people might have got sick of government stimulus allowing billions of capital to slosh around the system, risking inflation and simply making the richer rich, fiscal policy might be returning to the center-stage as the new means of keeping the public voting base satisfied.

The green race is going to drive new winners in the economy as entrepreneurs who have positioned themselves to make the critical investments needed for the economy. Especially the ones that going to create the very jobs that politicians plan to trumpet about. Being able to think ahead and consider the kinds of businesses desired both by the public sector in an economy that is highly pro-market will be rewarded. The risk is that the public sector decides to take on the direct investments themselves rather than to ‘incentivise’ the businesses to do so. This is why the pro-market orientation of the government is important.

For the markets where the government have the tendency to perform direct intervention or deem infrastructure investments way too strategic to be left to private sector, the green race may take those economy in a different direction. They may choose to create new state-owned and managed entities to make new direct investments or to use the existing ones. And the green jobs will be created within state-linked enterprises. Civil servants who are savvy in these areas will tend to gain within such systems.

Either way, there are going to be new ways smart people will be gaming the system.

Coffee stories II

What is interesting about the coffee stories I shared is that entire cultures can be reshaped by business models and the slew of marketing that is fueled from the leverage investors allows. I’ve always shared the example of how Grab overturned the culture of hailing cabs off the streets in Singapore. Singaporeans don’t even hop on the cabs at the taxi stands anymore.

This has implications for government incentivisation and the manner by which incentives are doled out and the behaviours they are trying to change. Singapore government had been quite skillful in this area, having a smaller market to government and being able to impose ‘tighter’ controls. There are often careful checks and balances to prevent individuals and corporations from gaming the system to extract benefits from the system without abiding by the desired behaviours. And there’s also a big theme of maintaining consistency. This was why for the longest time, the government only allowed married couples to purchase public housing directly from the authorities; and even today, singles are only allowed to own these flats if they are aged 35 and above. The government wants to promote family formation and hence maintaining some consistency in the policy of public housing subsidisation.

Those elements recur in the position of offering tax breaks, providing further direct grants to new parents, priorities in public housing and so on. Businesses can learn from the same by ensuring that they steward the limited resources they have to reward those customers behaving in the desired manner (eg. referring other customers, posting about using their products) while making it harder for the ones whom the business do not desire as customers to consume the products.

Social redistribution by moral suasion?

As Singapore steps into the prosperity of modern society, we recognise increasingly that our prosperity and success isn’t about us as individuals but something we need to develop as a society. And that is driving the whole Forward SG exercise: the idea around reworking our social compact. Prime Minister Wong declared, “Here I have a plea to all: For a new definition of success to become a reality, all of us – as consumers – must be willing to bear a higher cost for the goods and services we consume. We must recognise the important work that our fellow citizens undertake to keep our society going, and do our part to uplift and boost their wage prospects.”

For this plea to work, it is not just about consumers and cultural mindset changes, the whole economic engine of the government including our policies on trade and industry. Essentially, our government needs to develop new ways to think about inflation: that it may be part of the consequences of uplifting the wages of our fellow Singaporeans and tradesmen. And the mechanisms around public sector procurement might need to change too if the PM himself is suggesting that consumers must be willing to bear higher cost?

We all are consumers, taxpayers, employers or employees somehow; the whole economy works such that we have these overlapping roles and what we fail to spend through consumerism, can be spent by the government through taxation. If the government genuinely wants to uphold certain principles of social distribution, it would be really hard to do so by moral suasion and avoid damaging the pro-growth stance.

Recycling woes

When you deposit a recyclable item into the rubbish bin or down the chute here in Singapore, did you know that it means the item will actually never be recycled? It will definitely end up in the incineration plant where everything is burnt. Metals are sometimes recovered but that is just about all. This is because everything collected in the green waste bin by the licensed public waste collectors have to be sent to the incineration plants.

On average, incineration removes more than 90% of the waste matter, leaving a residue which is buried in our offshore landfill at Pulau Semakau. Soon, when the Integrated Waste Management Facility in Singapore is built, there might be more post disposal sorting that takes place after our public waste collectors retrieve the waste. But before that, despite the possible economic incentive of picking out suitable waste materials or matters to be recycled before incinerating the rest, the market is unable to respond to them.

Incineration keeps going and expanding in Singapore as waste volumes increase because that had been a proven solution that is difficult to challenge even when contending technologies and approaches works. If it ain’t broke, why fix it? Yet as our landfill approaches the point of its maximum capacity, we cannot keep kicking the can down the road.