Singapore’s Industrial Champions Are Rewriting Their Playbook


The triple shock of the pandemic, disruptive tech and climate change is pushing Singapore to rewrite one of the world’s most successful economic models.

Over the past two years, at least eight state-linked companies have announced major mergers, acquisitions, asset disposals or privatizations in the island’s biggest industrial overhaul in two decades. Oil-rig builder Keppel Corp. has been pivoting toward clean energy, while Sembcorp Industries Ltd. shed its rig business altogether. Singapore Telecommunications Ltd. is entering the world of digital banking.

“I compare this to the restructuring phase of Singapore conglomerates in early 2000s” in the aftermath of the SARS virus and the dot-com crash, said Kenneth Tang, a portfolio manager at Nikko Asset Management Co. “Those were very dark times for Singapore but they became a catalyst for change.”

Singapore’s government has for decades curated the nation’s economic future through a group of state-owned champions, shifting direction as needed to stay relevant in the global economy. But the latest rewriting of the nation’s industrial playbook may prove harder as the giant firms take on competitors that are often newer and more nimble.

The government has been pumping billions in recent years into transforming 23 industriesincluding manufacturing, financial services and real estate to meet the challenges of digitalization. At the same time, Singapore has created a 2030 roadmap to become a regional hub for carbon trading and green finance.

It has also set aside about S$25 billion ($18.4 billion) through 2025 for research in areas such as health and biomedical sciences, climate change and artificial intelligence. And a series of industry-led groups have been set up to explore opportunities in areas such as robotics, e-commerce and supply-chain digitalization, with government support.

For Keppel, Sembcorp Industries and Sembcorp Marine Ltd., the changing global economy means trying to shed or merge oil-related businesses and focus on renewable energy such as offshore wind and hydrogen. 

It’s a major shift for one of the world’s top oil trading and refining cities, particularly at a time when the fuel’s price has been rising. Singapore has oil refining capacity of 1.5 million barrels per day, according to the U.S.’s International Trade Administration website. It’s the fifth-largest refinery and export hub in the world, the U.S. Energy Information Administration says.

Company Announcement date Details
Mapletree Commercial Trust, Mapletree North Asia Commercial Trust Dec. 31, 2021 Merger deal totaling S$4.2 billion
Singapore Press Holdings March 30, 2021 Strategic review of various businesses
Capitaland March 22, 2021 Privatization; creation and listing of Capitaland Investment Management
Keppel Jan. 28, 2021 Plan to exit offshore rig-building business, focus on clean energy as part of a 2030 roadmap
Sembcorp Industries June 8, 2020 Demerger with Sembcorp Marine; focus on sustainable energy
Sembcorp Marine June 8, 2020 Demerger; S$2.1 billion rights issue
Singtel Dec. 30, 2019 Announces digital banking ambitions

While Keppel has increased its focus on renewable energy, it’s also expanding its liquefied natural gas business. It’s in talks to merge its rig-building operations with smaller rival Sembcorp Marine. Sembcorp Marine has also moved into clean energy in recent years, while it still works on fossil-fuel projects.

“They are trying to build a new train while they are keeping the oil train running,” said Mak Yuen Teen, an associate professor of accounting at the National University of Singapore. 

Sembcorp Industries has been working on solar and wind energy projects across India, China and the U.K. but still gets a majority of revenue from selling energy from conventional sources such as coal and natural gas. 

READ: Singapore Prepares to Swap Oil Hub Status for Greener Future

Singapore’s oil-refining industry isn’t going away though, partly because many of oil’s by-products are still ubiquitous, used in everything from toothpaste to synthetic fibers.

Refiners “are essentially saying we still need all these things in our daily lives but how do we make it more energy-efficient to produce the by-product,” said Song Seng Wun, an economist at CIMB Private Banking. Singapore’s biggest renewables exports are likely to be goods such as semiconductors and services for companies seeking energy efficiency, he said.

The government is also promoting environment-friendly services in areas such as agritech and waste management.

Meanwhile, Singapore is among the first countries to set up a platform to trade carbon offsets that’s backed by a national stock exchange. But it faces competition from CME Group Inc., which introduced trading of carbon offsets futures last year.

One of the headline-grabbing changes that the city-state is making to transform its economy is in finance — opening up banking to digital entrants. 

Telecommunications firm Singtel was among the four winners of digital banking licenses in December 2020, in partnership with ride-hailing and food-delivery giant Grab Holdings Inc. The country’s three conventional banks, including Temasek Holdings Pte.-backed DBS Group Holdings Ltd., are also embracing virtual services. 

The firms are all “moving in the right direction but let’s see if they can make any money out of it and how they cope with different competitive environments,” said abrdn Plc’s veteran fund manager Hugh Young. “For Singtel, in banking, it will be the Revoluts” that will be the main competitors, he said, referring to the rapidly growing financial-technology firm co-founded by former trader Nikolay Storonsky in 2015.

To be sure, some of the companies themselves acknowledge that the process of change will be gradual, with Keppel anticipating it will take two or three years to restructure its offshore and marine business.

Investors, too, are adopting a wait-and-see attitude, said Benjamin Goh, head of research at Securities Investors Association Singapore. So far, the restructuring has had a mixed impact on the companies’ stock performance, even though clean energy and tech have been buzzwords in recent years. It has also failed to boost the overall market. 

The Straits Times Index fell 3.1% over the last two years versus a 34% surge in a measure of global stocks. The Singapore gauge trades at about 13 times estimated earnings, versus about 18 times for its global counterpart.

“The strategic shifts we are seeing from digitalization, lowering emissions and pivoting to sustainable business models would need long runways,” said Thilan Wickramasinghe, an analyst at Maybank Kim Eng Securities Pte.