F1 as a business magnet
In most countries, Formula One is primarily a spectacular sporting event, but in Singapore, the Grand Prix transforms into something much bigger than a race weekend; the city becomes a seven-day spectacle of networking events and business presentations.
Because the track is right in the center, the city-state is buzzing with high-class seminars, exclusive dinners and investor meetings this week, against a backdrop of F1 cars racing along Marina Bay. Here, Formula One is not just a sport, but an engine for economic growth and innovation.
Singapore has invested significant sums to bring Formula One to the city-state. The first race was held in 2008 and its organization cost an estimated $150 million USD per year.
About 60% of this cost was borne by the Singapore government, while the remaining 40% was financed by the event's organizer, who was fortunate to have Singapore Airlines as the title sponsor - not entirely coincidentally, a company largely owned by Singapore's sovereign wealth fund Temasek.
Norway drills oil, Netherlands saves, Singapore invests
Temasek is an investment company, named after the name of the island before the British dropped by uninvited for two centuries, and is wholly owned by the Singapore government. Founded in 1974, Temasek has a diversified investment portfolio spanning various sectors such as financial services, telecom, healthcare, infrastructure, real estate and technology.
Interestingly, Temasek operates independently of the Singapore government in terms of its investment decisions, despite being a state-owned company. Singapore also has a second sovereign wealth fund called GIC, which is more risk averse and operates mainly as a passive investor with a longer investment horizon, plus another central pension fund (CPF). In total, the Singapore government thus has more than $1.6 trillion ($1,600 billion) in invested assets.
To put into perspective, the famed Norwegian pension fund (known as the Oil Fund) has "only" $1.4 trillion under management while Singapore is approaching the Dutch pension funds, collectively representing over $1.6 trillion in invested assets. Except that for their full piggy bank, the Norwegians had to pump out no less than 2% of the world's supply of dinosaur blood from the earth's crust, and the Netherlands has earned over four hundred billion in natural gas profits over the last sixty years, which has led to people in the northern province of Groningen still regularly suffering from earthquakes as a result.
The Netherlands, with almost 18 million people, has more than three times the population of Singapore, which has no natural resources unless you love swamps and mangroves, and has only been independent since 1965.
Singapore went past Israel, to quantum computing
This makes Singapore mostly similar to Israel, as the GDP of both countries is also similar (around 500 billion USD), only the GDP per capita is much higher in Singapore. Singapore learned well from Israel on how to turn a small country with no natural resources into an economically developed country, with a strong focus on good education.
What I am trying to make sense of for you with this interlude of socio-economic history lessons, is the structured way Singapore has organized its society and made it ready for the digital world.
The first period after independence in 1965 focused on trade and distribution. Still to this day, the port of Singapore is the second largest container port in the world after Shanghai, and Changi airport has been voted the best airport in the world 12 times. From out of the plane until into the cab, I usually manage within 15 minutes. Would Amsterdam AirportSchiphol have ever looked at Changi?
In the second phase, Singapore developed as the financial center of Southeast Asia, with over 200 banks serving consumers and businesses from the Asean region that has a population of nearly 700 million; by comparison, the European Union has a population of 450 million and the United States over 330 million. With that hinterland, Singapore's focus on logistics, trade and financial services made sense.
In what I see as the third phase, Singapore focused on building interests abroad and invested in the world's leading financial players. For example, Temasek bought stakes in BlackRock, Visa and Mastercard.
In its fourth phase, Temasek responded quickly to the huge growth in market value of the world's largest technology companies, buying significant stakes in Airbnb, Amazon, Zoom, Tencent, Palantir, Alibaba, Stripe and Nvidia, to name just a few.
We have now reached the fifth phase in which Singapore itself is seeking to develop global players. With a broadly supported industrial policy, which is always a risk because anyone, including scientists and governments, can be wrong in identifying promising sectors, an effort is being made to make targeted investments in promising startups.
As an associate of SGInnovate, the government fund that invests in deep tech companies, explained it to me, "We thought quantum computing was important and there are eight serious companies in that field in Singapore. We have invested in all eight.'
How do you get the right people?
Whether that approach works depends purely on the quality of the fund managers. It is impossible for other countries to blindly imitate Singapore's industrial policy and expect similar success. After all, do those countries manage to put the right people at the wheel? And how do you get the right people properly trained and motivated?
Education and healthcare are among the world's best, and for years Singapore has been voted the best place to do business. But above all, Singapore is pragmatic. I think the most striking example of this is the subsidies that can amount to tens of thousands of dollars for people who buy homes within four kilometers of their parents, or their married children. This makes people care for their parents faster, crucial with an aging population, and at the same time makes it easier for grandparents to look after their grandchildren. This reduces the pressure on care facilities, but of course requires a good relationship with your parents (in law).
The Chinese, Malay and Indian populations live together relatively harmoniously because the handling of racial differences, a major problem in many Western countries, has been handled in its own unique way: both in the composition of political parties and in housing construction, it is pragmatically but strictly determined that all ethnic groups are represented.
Thus, quotas are set by ethnic group by residential neighborhood and so, for example, Chinese children learn at an early age to get along with Malay and Indian neighbor children. It's hard to hate someone you used to play ball or tag with. Quoting by race and culture is a simple but effective approach that many Western countries could learn from. And would Israel have ever looked at Singapore?
Then there are the rewards. In Singapore, quality of performance is rewarded and government officials, especially those in high positions such as ministers, are among the best paid in the world. The idea is to attract top talent and minimize corruption by offering competitive salaries that can rival those in the private sector. A minister in Singapore can earn over SGD 1 million (USD 733,000) annually.
While it is not published what the salaries and bonuses are of the GIC and Temasek executives, it is known that compensation is market-based including performance bonuses for long-term results; no bonuses for simply having one good quarter.
The success is measurable
How well are these well-paid (semi) civil servants performing? The answer is: very well. The 20 year real rate of return of the most risk-free GIC is 4.6%, while Temasek's riskier investments have yielded as much as 14% a year since inception. That's considerably better than its benchmark, the S&P 500, which has averaged less than 10% per year over the past 20 years.
On Temasek's net portfolio value of $287 billion, that 4% performance difference equals a hefty $12 billion a year.
Of course, it is not always a party, as Temasek lost 5% in value last year, including the infamous $275 million write-down on its stake in FTX that led to salary cuts for the investment managers involved, but that was still less than the 20% drop in the S&P 500.
Block 71 and Carousell
Temasek invests globally, but 54% of its portfolio still consists of companies headquartered in Singapore. It is a government push to develop more high-quality startups, because money invested domestically yields more at the bottom line. This includes looking beyond just the money to increase the quality of the entrepreneurs.
Last Thursday, I visited Siu Rui Quek, the equally energetic and affable founder and CEO of Carousell, a Singapore-based online marketplace that operates in nine countries.
Quek explained how effectively the Singapore government proceeded when a decision was made more than 10 years ago to "breed" more entrepreneurs. First, as a student at the National University (NUS) interested in starting a startup, Quek was sent to Silicon Valley for a year through a government-funded program.
There, he and other participants worked at successful tech companies such as Facebook, Google and Microsoft on the condition that they return to Singapore to complete their studies. At the same time, a run-down industrial site near the university was transformed into Block 71, a fine incubator for startups.
Quek started their second-hand marketplace there with two college friends, which has since grown into a unicorn, a company with a market value of more than a billion dollars. He is convinced that without the help of the government, he could never have gotten this far.
One of the investors in Carousell was EDBI, part of the Ministry of Economy. Their participation helped persuade other, mostly foreign investors, to invest in Carousell.
F1 week features hundreds of large and small events
Almost all startups showed up this week as the world came to Singapore for the Formula One race. Siu Rui Quek said he did not even have time to come to the circuit because he had too many appointments and events scheduled over the weekend.
But the traditional players were also very active. The week began with the Forbes Global CEO Conference, followed by the big crypto event Token 2049 and the Milken Institute Asia Summit. The city buzzed with people in suits, pantsuits and black t-shirts, the mix of the traditional financial world and the startup scene almost visible in the streets.
At the prestigious Mandala Club on Saturday afternoon, venture capital fund Hustle Fund along with government agency Singapore Global Network (SGN) organized an event, sponsored by fintech startup Aspire, where entrepreneurs and investors mingled. Looking around at the crowded room, I wondered how many people would show up if something like this would be organized during F1 weekend in England, France or the US at 2 p.m. on a Saturday.
Max Verstappen had to win races in often spectacular fashion and attract a huge fan base before his home country of the Netherlands hosted another Formula One race after 35 years. In Singapore, the most expensive Ferraris usually drive slower than Dutch mothers on a cargo bike, but it didn't take a Singaporean racing driver to bring Formula One to Singapore. It was part of targeted policy.
With Formula One as its backdrop, Singapore shows that it is more than a hub for trade and finance. It is a testing ground for innovation and a melting pot of cultures. It makes this F1 weekend much more than a race; it is a snapshot of a nation constantly innovating and reinventing itself. It takes decades of so many moving parts for this policy to succeed that I don't expect other nations to be able to successfully imitate it. It requires courage, dedication and stamina, not qualities that the average politician in most other countries excels at.
I hope you enjoy the race today! Greetings from Singapore and see you next week.
