Government in business: No apologies necessary

Government need not apologise for taking a role in business, but it must move cautiously to determine, why, when and how it should be involved.

Singapore’s former Second Minister for Finance and Transport Lim Hwee Hua explores these questions in her book, Government in Business; Friend or Foe?

The debate over government’s role in business is an enduring one, she says, but still very much alive, and she does not claim to have the definitive answers.

“Contrary to conventional wisdom of finding the elusive ideal balance, this whole debate on the role of the state in business will continue to have a life of its own,” Lim said at the book launch jointly organized by Straits Times Press and NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO).

“What I certainly hope for, in writing this book, is that I have provided sufficient catalyst for a wider discussion.”

Speaking to an audience of business leaders, academics and officials, Lim outlined the many roles government has in business – as manager of the national economy, as a provider of essential services, as a policy formulator and regulator and as a customer when it outsources delivery of essential services.

When it becomes doctrinaire, when it becomes rigid and unresponsive… What has worked well in the past might no longer be relevant and government must recognise that

Lim Hwee Hua

Though she has extensive experience on both sides of the debate, both as a government official and in the private sector, she said she did not want to use the book to preach. Instead Lim has pulled together dozens of case studies to illustrate her points and bring to life what she admits might otherwise be a dry topic.

She takes the example of “Obamacare,” the US national healthcare plan signed into law by President Barack Obama, as an example of government as fiscal manager and regulator. The book launch took place just weeks after the US government shut down due to a Congressional impasse over funding for the program.

“Whatever the fate of Obamacare, what’s certain is its impact on the entire healthcare sector. And any stretching out of this impasse or any change in the scope of implementation will no doubt affect the private sector providers in terms of how big a business opportunity there is.”

In the chapter on Safeguarding National Interests, she highlights the UnionPay card in China as an example of government as a nurturer of local business.

In 2002, she told the audience, China appointed UnionPay as the sole settlement system for all renminbi-denominated transactions. Use of the card has exploded globally, and Lim says it has “out-issued” American Express, Visa or MasterCard.

ThinkAloud4“It has almost three billion cards in circulation,” she said, adding: “Every time I try to update the stats, the numbers have gone up, indicating that they have been gaining ground obviously at the expense of the other players.”

These examples show that government can be a friend to business. But, Lim says, there is a tipping point when it can turn from friend to foe.

“When it becomes doctrinaire, when it becomes rigid and unresponsive… What has worked well in the past might no longer be relevant and government must recognise that.”

Government can also tip the balance when it insists on shareholding being the only way it can influence business. “This we know is not true,” said Lim, pointing to the Indian government’s successful handling of the rescue in 2009 of Satyam Computer Services, which was near collapse after an accounting fraud scandal, without taking control as a shareholder.

Timing is everything, said Lim, adding that it is crucial for government to be shrewd about when to enter a market, but more importantly, when to exit.

“Entering the fray is frequently easier than making an exit,” she warned.

Above all, Lim said, government must be clear on how it wants to be involved.

“The policy decision if wrongly executed can sometimes lead to unexpected or even the wrong outcomes. And the different roles of government must be very clearly articulated and executed so that the objectives will follow what the original intent was.”

Ultimately, Lim concludes that although it’s not a given, government can continue to be a friend to business as long as it continually evaluates and evolves its various roles.

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