The ASEAN countries are experiencing a growth surge, unprecedented since before the 1997 Asian Financial Crisis. In this scenario, Singapore’s strategies and public policies with regards to building government-linked companies (GLCs) such as DBS Bank and Singapore Airlines – as viable regional and global brands – may be instrumental in shaping the way forward.
Listed on the Singapore Exchange, INTRACO describes its contemporary role as a company trading in materials and infrastructure. Originally named the International Trading Company, it was launched by the Singapore Government in late 1968 and tasked to explore new overseas markets and find new sources of raw materials at competitive prices. The function? Supporting an export-oriented industrialisation (EOI) strategy.
Established along the same axis as DBS and the Jurong Town Corporation (JTC), INTRACO was considered by former Finance Minister Goh Keng Swee as “…the most complex, difficult and challenging undertaking among the three institutions”, according to a report by TODAY Online.
Listed on the Singapore Exchange in 1972 to raise capital and operations with the market rules, INTRACO was incorporated in 1974 into the portfolio of Temasek Holdings. Until its divestment in 2003, INTRACO facilitated the creation of export markets for Singaporean products, in addition to sourcing for imports.
Following a divestment exercise in 2003 by Temasek (due to firms being successful commercial entities or becoming irrelevant), INTRACO Group has been focussing on the trading of plastics, telecommunications infrastructure and other materials. Its projects group manages the supply and installation of specialised building-related products. It’s long history has created a strong regional footprint in ASEAN and China, according to its corporate profile.
According to a PWC report, Asia’s share of the global middle class population is expected to grow from an estimated 30 per cent to 50 per cent or more by 2020. By 2015 the size of the middle class in Asia Pacific (APAC) countries will overtake the middle class populations of Europe and North America combined. Total consumer spending in ASEAN is projected to hit $2 trillion by 2020, representing real growth of 45.7 per cent over the 2013-20 period.
As one of the Four Asian Tigers, alongside Taiwan, South Korea and Hong Kong, there are lessons and insights that can be drawn from leveraging on government involvement in expanding trade links and marketing ASEAN products and services, overseas. INTRACO initially served to promote Singaporean products and services overseas through trade fairs and trade missions, a role later later assumed by the Trade Development Board.
This was later replaced by International Enterprise Singapore (IE Singapore), which launched in 1983 as a statutory board. INTRACO developed economic and trade links with Communist bloc nations and emerging economies in Africa, West Asia and Australasia, allowing the pursuit of an export-oriented economic strategy. Foreign companies looking to establish a business base in Singapore could also engage INTRACO as their local agent.
Shifts in the global economy in the aftermath of the Cold War ending resulting in INTRACO having to adapt its business model but ultimately losing its relevance as a strategically important GLC. The global environment changed, with INTRACO’s key purpose and business leverage blunted.
According to Yahya, INTRACO could not redefine itself from being a broker between suppliers and consumers. It ended up as a significant player in value-adding activities in the logistics, information technology and infrastructure development sectors in the early through to late 1990s. Experienced traders it produced also left to capitalise on their knowledge of far-flung markets, establishing their own trading companies.
An exodus of senior personnel in the mid-1980s caused a loss in its strategic focus and direction. Its case shows a necessity for continual transformation and redefinition of core mission and competencies,in order to remain relevant in the global economic environment.
Also Read: Are SEA e-commerce startups over-valued?
INTRACO’s case offers key lessons to the governments, policymakers and businesspeople of ASEAN.
While INTRACO is no longer associated with the Singapore Government, it is a key part of the economic history of the city-state. It leveraged on the legitimacy, links and international connectivity that a government brings in order to facilitate Singapore’s industrialisation. It also built up a critical mass of traders and staff knowledgeable about different overseas markets.
Singapore drew its inspiration from the Mittelstand model of Germany, Austria and Switzerland, as well as the soga shosha (general trading companies) of Japan, which served to open new economies to Japanese merchants, goods and services. It similarly drew inspiration from Israel for crafting innovation policies and infrastructure aimed at growing startups, as well as leveraging on the business relationships of the bamboo network.
In many ways, the ‘bamboo network’ is similar to the large Jewish diaspora that Israel has leveraged on, in part, to drive its economic and political interests in the international arena.
Developing the human capital and connectivity of a nation is crucial to establishing strong trading links in the global economic network. Aside from plugging into the global trade network, it also serves to form and establish a supply chains with reliable and trusted partners.
At a time when the state had few levers to generate employment, INTRACO helped fulfil the immediate economic requirements of Singapore, which lacked the large internal markets that most ASEAN countries possess. By facilitating the development of strong trade relationships and building a cadre of skilled merchants and traders with awareness of overseas market, it helped develop the trade links that propelled Singapore’s early economic growth.
Indonesia has a diaspora of expatriate workers in the Middle East and in Europe, focused on the Netherlands and Australia. Vietnam has significant diaspora populations with a presence in Australia, the United States and the EU, focused on France. Leveraging on these connections could lead to strong trade relationships and economic growth further down the line.