Tuesday, July 13, 2010
Dalvey Road residential site offered for collective sale
Business Times - 06 Jul 2010
A PLUM freehold residential site at Dalvey Road has come on the market. Villa D'Este, being offered through a proposed collective sale exercise, has a land area of about 55,480 square feet. Its guide price of $115 million reflects a unit land price of about about $2,343 per square foot of potential gross floor area. No development charge is payable.
Currently Villa D'Este comprises 12 apartments sitting in an area approved by Urban Redevelopment Authority for the most exclusive housing form - Good Class Bungalows.
Based on a URA circular dated April 6, 2009 and its guidelines, Villa D'Este may be redeveloped back to apartments, provided there is no intensification of the existing approved gross floor area (GFA) and storey height.
The GFA has been verified by the URA to be about 49,071 sq ft and the developer can choose to build 13 to 14 apartments with an average size of about 3,500 sq ft each, says CB Richard Ellis, the property's marketing agent.
Ten of the the 12 owners have signed the collective sale agreement.
Villa D'Este comprises a part three-storey and part four-storey apartment development sitting on a car park podium.
The site is located in tranquil surroundings overlooking mature trees and greenery. It is also within walking distance to the Singapore Botanic Gardens.
'The new development is expected to draw keen interest from foreign buyers, especially the Chinese and Indians, who would like to live within the most prestigious Good Class Bungalow areas but are unable to own landed properties. Given its excellent attributes, several foreign parties have already expressed their keen interest to acquire the site,' CBRE said in a news release yesterday.
Villa D'Este's tender closes on August 4.
Temasek report may reveal extent of asset shift, succession
Business Times - 07 Jul 2010
It has been expanding into energy, commodities and agriculture
SINGAPORE wealth fund Temasek Holdings is expected to show the extent of its portfolio shift towards the resources sector and may provide clues about leadership changes when unveiling its annual report for 2009/10 this week.
The world's eighth-largest sovereign wealth fund may also respond to speculation that Singapore funds are in talks with BP Plc to take a strategic stake in the oil major as it struggles with a devastating oil leak in the Gulf of Mexico.
Temasek declined to comment on the speculation yesterday. With $172 billion in assets as at end-July 2009, Temasek could also reveal this month that it fared better for the year ended March 31 after assets fell 30 per cent in the prior year as the global financial crisis struck.
It has been expanding aggressively into energy, commodities and agriculture. Financials and telecoms, however, still account for the biggest share of its holdings.
'Temasek's move to resources is consistent with its goal of catering to Asia's emerging middle class,' said Melvyn Teo, director of the BNP Paribas Hedge Fund Centre at the Singapore Management University.
'Demand for resources will go up because of emerging economies like China but there is only so much supply, so prices will go up over time.'
The fund's recent investments include convertible preferred stock in US natural gas firm Chesapeake Energy and India's GMR Energy, and shares in Canadian platinum producer Platmin.
Singbridge, a wholly owned unit of Temasek, may invest in a $16 billion agricultural project in north-eastern China that would produce corn and soyabean for Chinese consumers and export pork, beef and dairy products to countries such as Japan, South Korea and Singapore.
According to Temasek's report for the year ended March 2009, the fund held about 5 per cent of its assets in energy and resources, unchanged from March 2008. That proportion could have risen to around 8 per cent by March 10 involving additional investment of about $4 billion, analysts said.
In 2009, investments in financial services comprised 33 per cent of the fund, while telecommunications and media made up 26 per cent.
The fund came in for some criticism last year over its loss-making investments in Western banks such as Bank of America/ Merrill Lynch and Barclays.
But things would have looked better for Temasek in the latest year as stock markets improved. MSCI's world equity index jumped 56 per cent in the 12 months to March 2010, while the MSCI Asia ex-Japan index gained 74 per cent.
Temasek may provide cues about when current CEO Ho Ching is expected to step down and who her successor might be.
Ms Ho was scheduled to leave Temasek in October last year but her designated successor, former BHP Billiton CEO Charles Goodyear, left in July, citing differences in strategy.
Temasek said in May that former Singapore Exchange CEO Hsieh Fu Hua would join Temasek as executive director and president in August to assist Ms Ho in areas such as talent development and succession planning.
Temasek may also shed more light on how it plans to build up Seatown, a multi-billion-dollar investment firm it set up earlier this year with staff seconded from Temasek. Sources said that Seatown aims to raise funds from external investors to earn fees as well as show foreign governments that Temasek was a financial investor with no political agenda. Seatown, the English word for 'Temasek', will in time allow ordinary Singaporeans to co-invest with the firm.
'I really hope to see more information about Seatown, as it adds an extra dimension to how Temasek is set up,' said SMU's Mr Teo. -- Reuters
China won't dump US Treasury securities
Jul 8, 2010
BEIJING: China yesterday ruled out the 'nuclear' option of dumping its vast holdings of United States Treasury securities but called on Washington to be a responsible guardian of the dollar.
In the third in a series of statements explaining its work to the Chinese public, the State Administration of Foreign Exchange (Safe) sought to allay concerns in the outside world that arise whenever Beijing shifts its holdings of US government debt.
'Any increase or decrease in our holdings of US Treasuries is a normal investment operation,' said Safe, the arm of the central bank that manages China's official currency reserves.
It said it constantly adjusts its portfolio to maximise returns, and any changes to its US Treasury portfolio should be seen in that light and not interpreted politically.
In a series of questions and answers posted on its website, Safe asked rhetorically whether China would use its US$2.45 trillion (S$3.4 trillion) stockpile of reserves, the world's largest, as a 'nuclear weapon'.
Safe said such concerns were completely unwarranted.
'The US Treasury market is the world's largest government bond market, and US Treasury bonds deliver good security, liquidity and market depth with low transaction costs.
'The US Treasury market is a very important market for China,' the agency said.
China held US$900.2 billion in US Treasuries at the end of April, according to US Treasury data released on June 15. Bankers say China's total holdings of dollar-denominated assets are much greater, accounting for perhaps two-thirds of its reserves.
Safe also gave a qualified vote of confidence to the dollar. It acknowledged that financial markets were very concerned at one point that massive US government borrowing would drive the American currency lower.
But it said economic conditions elsewhere were also a factor in determining the dollar's trend. The euro zone, for instance, was struggling with high government debt levels.
One of the prime concerns of Chinese Internet commentators is that a long-term decline in the dollar or euro will erode the value of Safe's portfolio.
To that end, Safe called on the US and other major countries to take 'responsible measures' to maintain the value of their currencies. This meant withdrawing monetary stimulus in a reasonable manner and relying less on deficit spending.
Safe was lukewarm about gold as an investment. 'It cannot become a main channel for investing our foreign exchange reserves,' the agency said
Deep sea fish farming going swimmingly well for Singapore
SINGAPORE - Deep sea farming is helping Singapore meet its supply needs. And the republic's clean and sheltered waters are apparently a factor for the success of Barramundi Asia, Singapore's biggest commercial fish farm.
Located off Pulau Semakau, the farm about a half-an-hour's boat ride from the city, enjoyed its first harvest last October.
It now produces 500 tonnes of barramundi, also known as Asian sea bass, a year.
Mr Joep Kleine Staarman, managing director of Barramundi Asia, said: "Fish farming in South-east Asia is mainly done in Indonesia and Malaysia. But Singapore actually has very good water quality. Having a fish farm so close to Singapore brings the fish very fresh to the market."
And with help from Agri-Food and Veterinary Authority or AVA, Barramundi Asia aims to boost its output to 2,000 tonnes of fish by 2012 or 2013.
Ultimately it aims to provide more than 80 per cent of the fish consumed here, and efforts in that direction include the 100-plus licensed floating fish farms in Singapore's coastal waters.
AVA chief executive Tan Poh Heng said a selective breeding programme was started here about five years ago. "We look for the best breeds, the blue stocks, and these are able to grow much faster by 15 per cent, even up to 30 per cent," he said, adding: "When you can grow faster, you can have better productivity."
Currently, Singapore gets most of its fish from neighbouring countries like Malaysia and Indonesia.
Crunch awaits world's banks with trillions due
Jul 13, 2010
FRANKFURT: The sovereign debt crisis would seem to create worry enough for European banks, but there is another gathering threat that has not garnered as much notice: the trillions of dollars in short-term borrowing that institutions around the world must repay or roll over in the next two years.
The European Central Bank (ECB), the Bank of England and the International Monetary Fund have all recently warned of a looming crunch, especially in Europe, where banks have enough trouble raising money as it is.
Their concern is that banks hungry for refinancing will compete with governments - which also must roll over huge sums - for the bond market's favour. As a result, credit for business and consumers could become more costly and scarce, with unpleasant consequences for economic growth.
'There is a cliff we are racing towards - it's huge,' said Mr Richard Barwell, an economist at Royal Bank of Scotland and formerly a senior economist at the Bank of England, Britain's central bank. 'No one seems to be talking about it that much.' But, he added, 'it's of first-order importance for lending and output'.
Banks worldwide owe nearly US$5 trillion (S$6.9 trillion) to bondholders and other creditors that will come due in 2012, according to estimates by the Bank for International Settlements (BIS). About US$2.6 trillion of the liabilities are in Europe.
US banks must refinance about US$1.3 trillion in 2012. While that sum is nothing to scoff at, analysts seem most concerned about Europe because the banking system there is already weighed down by the sovereign debt crisis.
How banks will come up with the money is an open question. With investors worried about government over-indebtedness in Greece, Spain, Ireland and other parts of Europe, many banks have been reluctant or unable to sell bonds, which they typically use to raise money that they lend, on to businesses and households.
The financing crunch has its origins in a worldwide trend for banks to borrow money for shorter periods.
The practice of short-term borrowing and long-term lending contributed to the near-collapse of the world financial system in late 2008 when short-term financing dried up. Banks suddenly found themselves starved for cash, and some would have collapsed without central bank support.
Government bank guarantees extended in response to the crisis also inadvertently encouraged short-term lending. The guarantees were typically only for several years, and banks issued bonds to match.
Other banks took advantage of the gap between short-term and long-term rates, borrowing cheaply from money markets or central banks and lending to their customers at higher, long-term rates.
A study in November by Moody's Investors Service found that new bond issues by banks during the past five years matured in an average of 4.7 years - the shortest average in 30 years.
Since then, worries about Greek and Spanish debt and whether Europe is headed for another recession have caused new problems. Investors are unsure which institutions are in good shape and which are sitting on piles of bad loans and potentially tainted government bonds.
Bond issuance by financial institutions in Europe plunged to US$10.7 billion in May, compared with US$106 billion in January, and US$95 billion in May last year, according to Dealogic, a data provider. New issues have recovered somewhat since, to US$42 billion last month and US$19 billion so far this month.
Bank stress tests being conducted by European regulators could help if they succeed in convincing markets that most banks are healthy.
Bank regulators plan to release the test results, covering 91 large banks, on July 23.
Mr Sandeep Agarwal, head of financial institutions debt capital markets in Europe at Credit Suisse, predicted that the market could be separated into haves and have-nots, with healthy banks raising money fairly easily but weaker banks being required to pay a premium.
'There is cash at the right price for many institutions, not all institutions,' Mr Agarwal said.
That could add pressure on the weakest banks to merge, seek government help, or scale back their activities. Some might even fold.
The Landesbanken in Germany, savings banks in Spain or other institutions that have struggled may be forced to confront difficult choices.
A shortage of bank finance also could create quandaries for the ECB, which appears anxious to wean banks from the cheap cash that it began providing in the heat of the global financial crisis.
If institutions are unable to raise the money that they need on the open market, the ECB would have to decide whether to continue to prop them up.
'Banks that have trouble tapping new funding sources will have to shrink,' the BIS said in its annual report late last month. The BIS brings together the world's main central banks.
Mr Jean-Francois Tremblay, a Moody's vice-president who has studied the refinancing issue, said that so far banks had managed to roll over debt better than expected.
They have increased customer deposits, drawn on cash from central banks, or simply reduced their lending and their need for new financing - which is exactly what some economists feared.
NEW YORK TIMES
IMF warns of risks to Asian economies
Jul 13, 2010
DAEJEON (SOUTH KOREA): Asia may be experiencing a sharp and quick rebound from the global financial crisis, but it has received a word of warning from the International Monetary Fund (IMF).
The region, said IMF chief Dominique Strauss-Kahn yesterday, should brace itself for possible further shocks, including being hit by a potential spillover from the euro zone crisis.
Or exuberant investors could pour so much capital into Asia that parts of the region could overheat, bringing about dangerous credit and asset bubbles.
The warning comes just after last week's growth forecast by IMF for all of Asia - a buoyant 7.5 per cent this year, well above the average 4.6 per cent worldwide. But the IMF managing director also sought to soften the blow, stressing that a global double-dip recession was unlikely as recovery remains on track.
'Asia's time has come, no one can doubt that Asia's economic performance will continue to grow in importance,' he said yesterday at the opening of a high- level economic forum in the central South Korean city of Daejeon.
'But downside risks - including the recent turmoil in Europe - mean that Asian policymakers need to remain attuned to negative shocks.'
The region also faces a real threat in the sharp rebound in capital flows that is likely to emerge as investors avoid Europe, the United States and Japan, where growth has been sluggish, for a burgeoning Asia. 'Such huge inflow of capital can create instability,' he warned.
To manage such a problem, Asian nations could consider measures such as currency revaluation and even temporary capital controls, he suggested.
Jointly organised by the IMF and South Korea, the two-day forum on Asia brings together senior policymakers and economists including Singapore's Finance Minister Tharman Shanmugaratnam and his Thai counterpart Korn Chatikavanij. Both men are due to take part in a round-table discussion today.
Yesterday, South Korea's Finance Minister Yoon Jeung Hyun echoed Mr Strauss-Kahn's concern, noting that developing countries were not doing enough to withstand external shocks from the high volatility of capital flows.
According to media reports, Seoul and the IMF are looking at a possible global financial safety net that would give nations quick access to funds, helping them stave off crises and also discouraging emerging market nations from hoarding foreign reserves. Details are expected to be unveiled in November when South Korea hosts the G-20 summit.
The warnings for Asia come amid emerging signs that the global economic recovery may be losing steam. China's economic growth appears to be slowing down, while the US has reported a stream of disappointing economic data.
Last week, an IMF report also warned that Europe's credit woes could hit bank funding and corporate financing elsewhere, especially Asian economies that are more dependent on foreign currency financing.
As if that was not enough, the European Central Bank and the Bank of England also sounded an alarm bell on a looming credit crunch.
Institutions worldwide, including banks and cash-strapped governments, will have to repay or roll over trillions of dollars they owe under short-term loans in the next two years. As they compete for the bond market's favour, it could squeeze the credit available for business and consumers, dampening economic growth.
Together, these risks pose a longer- term challenge for export-driven Asia, as Mr Strauss-Kahn and other speakers noted.
'It is a trigger for change,' he said.
Asia, he pointed out, needed to nurture a 'second engine of growth' by boosting domestic investment and consumption.
It is a strategy that some nations in the region are already pursuing, as they try to strengthen their social safety nets to boost private consumption, and introduce more flexible exchange rates.
China, for instance, recently raised the minimum wages of workers in the hope of revving up domestic consumption, a move hailed by Mr Victor Fung, honorary chairman of Hong Kong's International Chamber of Commerce.
He said: 'They are putting money into the hands of those who can actually spend.'
Raising the bar for poultry
Business Times - 13 Jul 2010
POULTRY rearing is hardly an industry that one would associate with land-scarce Singapore, yet a homegrown company has defied the assumption that agriculture is a sunset sector by re-inventing itself.
Kee Song Brothers Poultry Industries Pte Ltd gave a new twist to the chicken commodity through the launch of 'Sakura' chickens a couple of years back.
The discovery of the tenderer, lower fat 'Sakura' chicken came about partly through the help of NTUC FairPrice. A professor from Kyoto approached NTUC FairPrice with the technology to rear a US breed of chickens. At that point, Kee Song was the only poultry farmer with a rearing and processing facility so naturally, NTUC FairPrice paired Kee Song and the professor up. The process of developing the product took about two years and cost RM1.5 million ($650,000).
Prior to this, Kee Song had already thought about improving the quality of the average chicken.
'We wanted to differentiate ourselves from the market,' said managing director Ong Kian San. 'The older people were saying that the quality of chicken available today had dropped, and was unlike those available in the past. We wanted to regain that standard.
'As we owned our own rearing farm, we could control the type of chicken the farm reared. This was unlike our competitors, who contracted from professional farms. This gave us our edge,' he said, of the company's farms in the Yong Peng region of Johor, Malaysia. These farms, scattered around the area, add up to a total of 200 hectares.
What makes the Sakura chickens special is the rearing technique.
'Our chickens live in ventilated areas and they get to listen to Mozart's symphonies whilst roaming the compound!' said Mr Ong, emphasising the quality of life for the chickens. 'This way, the chickens will also build up their immunity and thus fend off infections that may come our way. In any case, there's no contact with wild birds and we are in strict compliance with AVA (Agri-Food and Veterinary Authority) regulations.'
The chickens are also given a lactobacillus compound in their feed. In addition, lactobacillus is sprayed around the compound. Because of the tender quality of the meat and lower fat content, Sakura chickens are able to command a price of about $8.60 a bird, which is about 30 per cent more than for regular chickens.
Sales of the Sakura chickens have been encouraging, which prompted the company to introduce its latest range, the Imperial Cordyceps chickens. These are fed with cordycepin which is derived from the cordyceps fungus. At $16.80 a bird, these chickens are considered the top of the range because of the health benefits associated with cordyceps, which is regarded as immunity-boosting in traditional Chinese medicine, as well as having 27 times more collagen content than a regular chicken.
According to Mr Ong, Sakura and imperial cordyceps chickens now account for about 50 per cent of his company's total sales, with the remaining contributed by regular chickens branded under the 'Lucky' name. They are distributed only at NTUC FairPrice supermarkets, wet markets and restaurants at the moment, but Mr Ong hopes to reach out to more markets as consumer awareness grows.
'People are getting converted; sales are picking up,' he said. 'People are beginning to appreciate the benefits of Sakura chicken. Our customers are more executives, those who are more health conscious.'
Currently, the Singapore production facility allows for 2,000 to 4,000 chickens to be processed per hour and sales have amounted to over 700,000 chickens a year. This makes up about 15 per cent of the market share locally, according to Mr Ong.
Kee Song's products are currently marketed by some advertisements but mostly by word-of-mouth. Kee Song also sponsors events connected to its products and holds cooking classes to demonstrate the best ways of using its products at various community centres.
'We believe the product should sell by itself; after customers have experienced the benefits, I trust they'll be converted.'
When asked about future plans, Mr Ong said: 'We intend to expand around Asia and in some parts of Europe.'
He noted that the Europeans prefer the breast meat of chicken; however, this is typically 'dry and tough'. But what sets the Sakura chicken apart is the tenderness of its breast meat.
'This is our selling point,' he said.
What needs to be done now is to obtain an export licence and to ensure that all the standards and regulations are met.
As for China, 'it's a huge market; we are now looking at ways to expand there', said Mr Ong. 'We are open to joint ventures, opening our own farm there or franchising our technique. I believe there's room in the Chinese market for our products.'
'Of course we're worried about the possibility of infringement of our patent, but China is too big a market to ignore.' he said. 'Just look for a ring around the chicken's ankle. That's our trademark!
BreadTalk rises to the occasion
BREADTALK has always had an insatiable appetite for new markets. At its tenth anniversary little has changed, except that chairman George Quek now sees expansion as a game of consolidation and franchising.
With its global footprint spanning 13 countries and territories, it appears that the Group has ridden the crest of success to achieve its best financial results to date and double digit growth for the ninth consecutive year.
However, instead of resting on his laurels, Mr Quek is already gearing up to lead his team into the next phase of expansion.
'We are now in an accelerated phase of expansion where we can replicate our business success in other countries,' said Mr Quek, 53.
His hunger has not been quelled and there is still plenty of fire in his belly, but his strategies are anything but mindless. Instead, he is mindful of the importance of building strong foundations.
Mr Quek cites choosing the right franchisees to penetrate new markets and the importance of strengthening existing brands as key to building sustainability of the brand.
'Franchises currently contribute 7.7 per cent to the overall revenue and will be the preferred route of expansion as they allow for quick and effective inroads into new markets. We need to leverage on a partner with a strong network and established presence in the region for more effective penetration into the market,' he stated.
The BreadTalk Group operates the BreadTalk bakeries, Food Republic food courts, the Din Tai Fung, RamenPlay and Toast Box restaurants among others.
Citing the success stories of global brand Haagen Dazs which has been selling ice cream dumplings in China, he believes that innovation and integration of the local culture into his foods is extremely important.
'This is why choosing a partner is so important. You need to choose someone with the knowledge of the market you are entering, someone who is familiar with the local consumer tastes and will be able to provide insight into the local market,' he added.
While he is quick to stress the thought and consideration that must go into choosing a partner that is essential for success in a new market, the greatest takeaway the management has garnered over the year, is the importance of accepting new ideas and adapting the signature of the brand to suit the territory.
'Every country's workings are different, it is absolutely critical to understand the inner workings of a culture and how we can adapt our product to suit the people. For example, our Breadtalk brand in China has come up with a line of luxury mooncakes to cater to the most exquisite of tastes,' he said.
China is at present contributing 34.8 per cent of the group's revenue which amounted to $246.5 million in the year ended 2009 but Mr Quek is hoping this contribution will increase to 50 per cent.
With this target in mind, the group has increased focus on China and has begun to consolidate its Food Republic brand there.
In a bid to strengthen their existing Food Republic brand in China, the Group recently announced a restructuring of food court operations. Operations in two food courts were shut down citing poor performance and those that remain have been undergoing facelifts in an attempt to boost the brand image, starting with the group's largest food court in Beijing.
Good grounding
'We are very keen on expansion but we know that in order to be successful, we need good grounding. We want to ensure that we deepen the roots of each brand and keep coming back to firm up our foundations,' he added.
Except for Beijing and Shanghai outlets which Breadtalk group owns wholly, all others are franchised.
While the Breadtalk Group is no stranger to China, the group's newest brainchild RamenPlay is preparing for its China debut.
The brand will also be officially launched in Hong Kong next month in conjunction with the opening of its third store in a prime location.
However, Chinese territory is not the only territory marked with expansion plans.
The Breadtalk brand successfully penetrated the Middle Eastern market two years ago and has since rolled out in three different markets including Bahrain, Kuwait and Oman. Another is slated to open in Saudi Arabia at the end of this year and more are in the pipeline to be opened in Jordan and Lebanon.
Vietnam is another country that has spelt success for Breadtalk since the first Franchise outlet was opened in Ho Chi Minh and have been extremely encouraging. The Group is targeting to open 10 stores in Vietnam in the next three years with plans to move into Hanoi.
The bakery business contributed 44.8 per cent to the Group's total revenue in FY2009.
The Group has also demonstrated its tenacity for penetration in the restaurant segment with a successful chain store strategy for Din Tai Fung that won it a new territory in Thailand which is scheduled to open in end 2010.
The restaurant business contributed 15.8 per cent of total revenue for the Group in FY2009.
However, the resilient entrepreneur's success story is not without its challenges.
Asked what the most challenging obstacle faced was, he was quick to mention the difference in expectations in different cultures.
'I have come to understand and accept cultural differences in different markets and have therefore been able to manage expectations of delivery of results.' he said.
Humbled by the wisdom garnered from their venture into Chinese territory, the group is well equipped for further progress and is in the process of scoring the potential in the Japanese market.
There is at present no concrete plans to expand into western territory yet.
MM Lee: Invest in China with confidence, guanxi
Business Times - 13 Jul 2010
(SINGAPORE) Singaporeans looking to invest in China should do so with confidence and the requisite 'guanxi', said Minister Mentor Lee Kuan Yew at the FutureChina Global Forum last night.
'Singapore's businessmen are largely welcomed in China. Many Chinese officials from the various provinces come to Singapore for training in urban management, and they understand that Singapore has a clean system,' he said in Mandarin.
'Some people say that Taiwanese are 'wu qing' (merciless), Hong Kong's people are 'wu chi' (shameless) and Singaporeans are 'wu zhi' (ignorant). But it is the ignorant that people feel are honest and reliable,' he said to much laughter from the 500 businessmen, government officials, academics and representatives of civil society present at the dinner dialogue.
The FutureChina Global Forum, organised by Business China in celebration of 20 years of diplomatic ties between Singapore and China, hopes to build a 'community of insiders' from business, political, academic, technological and cultural fields which might then hold annual or biennial gatherings here to share insights on China's developments, said Business China chairman Chua Thian Poh.
During the hour-long dialogue moderated by Singapore Press Holdings senior executive vice-president Robin Hu, Mr Lee fielded questions in both English and Mandarin on issues ranging from China's foreign relations, domestic political succession and political system, to the rising giant's relations with Singapore.
In response to a question on what Singapore might best teach China, Mr Lee said: 'Singapore is a small country, we cannot presume to teach other countries. If the Chinese are interested in certain aspects of how Singapore does things and request that we show them, of course we will do that, but we are a small country and would not have the audacity to instruct.'
'How can a population of four million teach a population of 1.3 billion how to eat rice?' he added, drawing laughs from the audience.
But there is room for mutual learning, especially between the younger generations. 'What can we learn from each other? Well, we have quite a number of mainland Chinese immigrants. They are very hardworking, they are very serious, their children do well in schools, giving our children enormous competition, that's good incentive for our children to do better,' Mr Lee said.
'What can we teach the Chinese? Bilingualism - understanding the world without translation. English is the second language of all countries that do not have it as their first language. Without it, you are at a disadvantage,' said Mr Lee. China needs to have 10 to 20 per cent of its population speaking English to create an English-speaking environment, he said.
The fundamental difference between the younger generations of Chinese in China and those in Singapore though, is one of mindset. 'We are in South-east Asia, and our outlook on any strategic issue must be from a South-east Asian point of view. They (the Chinese) are part of a huge continent and on their way to becoming a colossal power, so we start off from two different scales,' Mr Lee said.
Wednesday, July 7, 2010
Small investors 'not to be sniffed at'
RETAIL investors are growing in sophistication, with more of them capable of grilling company bosses. But more can still be done to help them make better-informed decisions.
That is the view of Mr David Gerald, president of the Securities Investors Association of Singapore (Sias) and long-time advocate of investor education here.
In a wide-ranging interview with The Straits Times last week, Mr Gerald shared his views on the local investing scene, and what Sias is doing to ensure it remains relevant.
The former magistrate has been at the helm of Sias, seen as the securities industry watchdog here, since the body was founded in the aftermath of the 1999 Central Limit Order Book (Clob) debacle.
That period has also coincided with a rise in the number and influence of retail investors here. Mr Gerald estimates that they account for about 60 per cent of the total value traded in the stock market.
'So I would say that they are becoming an important player in the market, so don't think they are not and push them to the sidelines. They actually have a controlling interest in the market,' he said, as a warning to companies that underestimate the impact of retail investors.
However, more investors need to make 'timely checks' on the performance and development of companies by engaging the investor relations units, he added.
'Many small investors in the past felt that all they needed to do was to invest in the company, leave it to its management to do whatever they want, then hopefully receive some dividends in capital growth. That should not be the case,' he said.
Knowing what you are putting your cash in is critical, added Mr Gerald.
That belief is one reason Sias has been a key driver of investor education over the last 11 years.
Despite being a non-profit organisation, Sias has held more than 500 educational programmes for some 65,000 retail investors since 1999.
These include online videos and publications on shareholder code of conduct, interpretation of annual reports, fundamental analysis of stocks and even a beginner's guide to investing.
Mr Gerald also set up Sias Research in 2003 to beef up its research capabilities and provide investors with independent and professional analysis on listed firms.
The recently concluded Asian Investment Conference and Exhibition 2010 is one of the newest investor education projects by Sias.
Mr Gerald said that seminars organised as part of this year's event - now in its second year - were attended by more than 20,000 people.
And unlike similar events in the past, which were usually attended by retirees, this year's event attracted markedly younger participants, he added.
'This is a new trend, where younger people are seeking out knowledge and accepting that investing without knowledge is a gamble.'
One of Mr Gerald's key observations in recent years has been that minority shareholders - largely local retail investors - are now becoming more active at annual general meetings (AGMs) in a positive way. These shareholders are not only asking relevant questions, but are also increasingly showing more interest in how a company is run and its overall corporate direction, he said.
'A decade ago, there was a perception that minority shareholders were only interested in what was being dished out at the buffet line, rather than a company's annual report,' he said with a laugh, referring to food and refreshments commonly served to shareholders during AGMs. 'But now, more are holding the company accountable, and asking very searching, in-depth questions, demonstrating their knowledge of the company.'
Helping investors get smarter is behind two other initiatives unveiled by Mr Gerald - the release of a new guide for investors and launching a Chinese-language Sias website within the year.
While funding for such initiatives continues to be a challenge for Sias, it has not stopped Mr Gerald from regularly extending assistance to investors who have found themselves in a bind.
Over the years, Sias has also helped mediate and settle issues between shareholders and firms, thus avoiding costly legal battles. 'Our efforts in dispute resolution have helped to maintain a peaceful investor relations climate in Singapore for the past 10 years,' he said.
As for retirement, the 66-year-old grandfather still shows no signs of slowing down. 'I still come to work at nine and leave at eight every day, and every other weekend, I would still be chairing some seminar somewhere,' he said.
White rice linked to higher diabetes risk: Study
Jun 16, 2010
That is one of the conclusions of a new study that backs long-held claims that brown rice is healthier than white rice.
People who ate at least five servings of white rice a week had a 17 per cent greater risk of developing diabetes than those who consumed less than one serving per month, according to the United States-based study published on Monday.
'We believe replacing white rice and other refined grains with whole grains, including brown rice, would help lower the risk of type 2 diabetes,' said lead author Qi Sun, of the Harvard School of Public Health and Brigham and Women's Hospital in Boston.
Examining data from more than 197,000 adults for up to 22 years, the study found that two or more servings of brown rice a week were associated with an 11 per cent lower risk of developing type 2 diabetes than those who ate less than one serving a month.
People with type 2 diabetes have high blood sugar levels, which are linked to the body's inability to produce enough insulin to properly break down sugars and starches into glucose for energy.
'These findings could have even greater implications for Asian and other populations in which rice is a staple food,' said senior author Frank Hu.
Even though rice consumption in the US is still lower than in Asian countries, it is increasing rapidly. More than 70 per cent of the rice eaten in the US is white, the researchers noted.
Replacing just a third of a typical daily serving of white rice with brown rice each day would lower the risk of type 2 diabetes by 16 per cent, the researchers found.
They also said replacing white rice with other whole grains, such as barley and whole wheat, could reduce the risk of the disease by 36 per cent.
Dr Sun said that they had taken into account numerous factors that might influence the results.
'We adjusted for these factors including body adiposity (fat), smoking, physical activity and other dietary factors, and the significant associations remained,' she said.
'From a public health point of view, whole grains, rather than refined carbohydrates such as white rice, should be recommended as the primary source of carbohydrates for the US population,' Dr Hu said.
Rice loses most of its bran and germ - its most important sources of fibre and nutrients - when it is refined to produce the white variety.
Brown rice, which retains the bran and germ, has more fibre, minerals, vitamins and phytochemicals than white rice. It also usually does not cause blood sugar levels to spike as much as the white variety does.
AGENCE FRANCE-PRESS, REUTERS
More turning to brown rice in Singapore
Jun 16, 2010
A CHECK with local supermarket chains showed that more people in Singapore are buying the healthier brown rice these days.
Brown, or unpolished, rice retains the outer layer, called bran, which contains nutrients and gives the rice its colour.
Ms Pooja Vig of The Nutrition Clinic noted that among Asians, Indians are genetically more predisposed to diabetes.
A study by the Singapore Eye Research Institute found that one in three Indians in Singapore are diabetic.
'White rice adds to the diabetes risk because it has a higher glycemic index, which means it causes blood sugar levels to rise faster than brown rice,' she said.
'Brown rice, with its lower glycemic index, is a healthier option as it is broken down into glucose a lot more slowly.'
Dr Leong Lai Peng, a senior lecturer in food science and technology at the National University of Singapore's Department of Chemistry, said: 'It is always advisable to eat the unpolished version. If any component is removed, such as the bran layer and germ in white rice, the nutrients are lost too.'
A small but growing number of people in Singapore have definitely taken the advice.
Retailers and importers here reported an increase in brown rice sales this year compared with last year.
FairPrice saw a 20 per cent jump even though the volume of brown rice sales remains small. The ratio of brown rice to white rice sold is three to 250.
A Cold Storage spokesman said that brown rice is popular with both health-conscious and elderly customers.
At Lam Soon Singapore, which sells the Naturel brand of organic brown rice, sales have gone up by 160 per cent since last year, said its senior marketing manager, Ms Sulina Tsai.
Madam Ng Mie Suan, 49, a cook at a childcare centre, said she bought her first packet of brown rice 15 years ago.
After all these years, her family no longer eats white rice, she added.
Ms Pooja said she likes the taste and the crunch of brown rice compared with white rice.
But she suggests that first-timers start by adding brown rice to white rice and then slowly increasing the amount of brown rice until they are used to it.
Goh Keng Swee, the practising economist
Business Times - 16 Jun 2010
IT'S been a month since former deputy premier Goh Keng Swee's passing away. The many eulogies for the great man have offered readers insights into his character and achievements. It is appropriate now to offer a dispassionate assessment of his record as a practising economist in the first decades of Singapore's independence. Praise is quite different from critical review, but our analysis suggests Dr Goh's achievements to have been as significant as many of his eulogists have suggested.
Over the course of his career, Dr Goh contributed in a myriad ways to Singapore's economic development, not to speak of education, defence and the arts. We focus on Dr Goh's policy preferences in three key areas which help explain how and why Singapore has achieved and sustained such a robust growth rate over the past 45 years.
First would be his determined practice of prudent public finance. In light of the spendthrift public policies (and ensuing fiscal meltdowns) in many parts of the world today, we hardly need to justify the importance of prudence on the part of government. But Dr Goh's early advocacy of prudent fiscal and monetary policies - unusual in the 1960s and early 1970s, when state enterprise and neo-Keynesian policies were in vogue around the world - helped to establish a solid macroeconomic base for Singapore's long-term development. As the plain-spoken economist put it in a speech to the Malayan Economic Society in 1966:
'Any small-time grocer in Chinatown can tell you that if you borrow money, unless you intend to abscond, it is prudent to put it to some use which will yield sufficient income to enable you to repay the loan with interest. Somehow or the other, this elementary precept of prudence has been considered to be beneath the dignity of economic planners.'
Second was Dr Goh's early rejection (by 1967) of then-popular strategies promoting import-substituting industrialisation (ISI) in favour of more open, export-oriented development. As the preferred route to development, ISI assumed that protected 'infant' industries would mature and compete in the world market. Alas, the 'infants' never grew up, and ISI proved disappointing (if not disastrous) to almost every country that tried it. Most damagingly, ISI policies led to the entrenchment of business and labour elites focused on protecting domestic monopolies rather than on raising productivity and competing in world export markets. As the record attests, Singapore's export orientation, based on free trade, manifested in part by the country's successful courtship of investments by large multinational corporations (MNCs), experienced great success.
Third was Dr Goh's emphasis on entrepreneurship in the process of economic growth. Few other economists during the 1960s and 1970s saw much of a role for entrepreneurs in their increasingly quantitative models of economic growth. Dr Goh, however, was well versed in the classics of social theory, particularly Max Weber and Talcott Parsons, and appreciated the economic importance of values and culture in determining economic outcomes for both individuals and societies.
Throughout his career, he therefore worked hard to establish public policies that would enable those individuals with values propitious to growth - sobriety, discipline, prudence, vision and an achievement orientation - to have a chance to prosper. He knew instinctively that Singapore needed entrepreneurs, but realised that the state could not create them; the most a state could do was to establish an institutional framework that would foster and support entrepreneurship, whether in individuals or in business entities of one kind or another.
There is nothing startling or original in what we have said. In fact, you can find it all in Adam Smith, who should be regarded as the proper mentor for policymakers in the Third World. Regrettably, many of the Third World policymakers have allowed themselves to be bemused and befuddled by the New Economists.
Dr Goh's pragmatic approach to economic development has been widely remarked upon. Yet, with the lavish praise accorded to the East Asian 'miracle' economies, it has been commonly argued that these examples of successful economic growth support the case of sophisticated government intervention in 'picking winners'. To be sure, Dr Goh envisioned an important role for the state - government promotion of public goods and externalities of one type or another through such institutions as the Economic Development Board (EDB) and the Jurong Town Corporation (JTC) are cases in point.
As importantly, however, he instinctively knew the limits of policy and legislation - what governments could not realistically do. He remarked that government involvement, other than maintaining a conducive investment environment, was not decisive for the 'dragon' economies of Hong Kong, Taiwan, South Korea and Singapore.
In terms of his general theoretical orientation, then, Dr Goh can be measured for the most part as a believer in the efficacy of markets and the private enterprise system. His pragmatic approach to growth arose out of his appreciation of the 'stern realities' of the development process, and respect for the 'harsh school' of experience, distinguishing him from the 'armchair pundits' who advocated purer strains of economic policy. For his 'impurities', everyone in Singapore owes Dr Goh many thanks.
Animal spirits are missing in this economy
Business Times - 16 Jun 2010
IT'S psychology, stupid. Not since World War II has an economic recovery been so hobbled by poor confidence. Every recession leaves a legacy of anxiety and uncertainty. But the present residue is exceptional because the recession was savage and - more important - its origins (housing bubble, financial crisis) were unfamiliar.
People are super-sensitive to the latest news, for good or ill, because their vision of the future is blurred, and their bias is gloomy. Having underrated economic risk during the boom, Americans may be overrating it now. Unfortunately, perceptions can become self-fulfilling.
The Obama administration is grappling uneasily with this reality. It can rightly claim that its economic policies quelled the near-hysteria of late 2008 and early 2009. But the success was partial, and the administration isn't getting much credit even for that. Only 23 per cent of the US public say President Barack Obama's policies have improved the economy, reports a new Pew survey. By contrast, 29 per cent think his policies made matters worse and 38 per cent believe they made no difference. For or against, those policies haven't restored faith in the economy's underlying strength.
People's and companies' decisions to spend or hoard, hire or fire reflect fickle hopes and fears. These fluctuate, but today's common starting point is pessimism. In May, 56 per cent of American families expected flat or declining incomes over the next year, reports the University of Michigan's Surveys of Consumers. Before the recession in early 2007, 89 per cent of families expected higher or level incomes in the year ahead.
The weak labour market is clearly a powerful psychological poison. Almost everyone knows someone who is or was unemployed - a jobless recent college grad, an idle construction worker, a fired manager. True, the unemployment rate (9.7 per cent in May) is below the post-World War II high (10.8 per cent in late 1982), but underemployment and prolonged joblessness hover near post-war peaks. Once lost, a job is hard to find. Almost half (46 per cent) of the 15 million unemployed have been jobless six months or more. Nearly a fifth of the labour force is unemployed, working part-time involuntarily or so discouraged they've stopped looking for work.
The stock market also shapes psychology. 'Our economy has become very sensitive to the stock market,' says Mark Zandi of Moody's Economy.com. The wealthiest 20 per cent of Americans represent about 60 per cent of consumer spending, he adds. These same people are most heavily invested in the market. When the market rises, they feel wealthier, save less and spend more - and vice versa. In mid-2007, their savings rate plunged to one per cent of disposable income; but when the market dropped, savings jumped to 16 per cent and spending suffered.
Consider the present implications. The market's rebound beginning in March 2009 prompted another reversal. Feeling richer, the well-off spent more. By year-end 2009, their savings rate had dropped to 3.5 per cent. Similarly, the market's latest decline could weaken the recovery. (At this writing, the Standard & Poor's Index of 500 stocks is down about 11 per cent from its recent peak.)
The danger is that pessimism feeds on itself and leads to a dreaded 'double-dip' recession. Companies won't hire because they fear customers won't spend; and customers don't spend because they fear companies won't hire - or may fire.
For the moment, a double-dip seems a long shot. Private hiring has restarted; inventories have been depleted; strong growth in China, Brazil and India has boosted US exports; psychology could turn for the better. Still, the fact that some knowledgeable observers fear a renewed recession attests to the low state of confidence.
What's missing are 'animal spirits', in the famous phrase of economist John Maynard Keynes. In the boom, surplus animal spirits spurred speculation. Scarce animal spirits now hinder recovery. Given the magnitude of the US housing and financial carnage, most of today's cautiousness and risk aversion - by both businesses and households - were unavoidable. But the Obama administration's anti-business rhetoric and controversial health 'reform' may have compounded the effect. These policies created uncertainties and fanned partisan rancour. In the case of health 'reform', they raised the cost of future full-time employees.
The administration believes these various policies don't hamper economic recovery. It ignores contradictions and inconsistencies. Historians, more detached and better informed, may conclude otherwise. -- The Washington Post Writers Group
Russian banking group out to woo Asian investors
(SINGAPORE) Russia's VTB Group has come a long way from its roots as a state-owned export-import bank focused mainly on serving big Russian companies.
Set up in 1990 as Vneshtorgbak, the bank went through several transformations in the past two decades, and has since become Russia's second-biggest banking group. In recent years, it has added retail banking and investment banking to its business mix, and expanded overseas.
In 2002, when its current chief executive Andrei Kostin joined the bank as part of a new management team, half of the bank's income was generated by just 10 clients, and it had total assets of just US$4 billion, Mr Kostin told BT in an interview last week.
Eight years later, VTB now has total assets of some US$110 billion (at end-March), including US$72 billion in customer loans, making it the second-largest banking group in Russia after Sberbank, which has US$230 billion in assets. VTB had some 5.8 million customers at the end of 2009, mostly in retail banking.
On May 27, the group announced a new three-year strategy, setting ambitious profit targets that will see the bank expand its retail banking business further in Russia, and shift more of its corporate and investment banking activities into fee-earning transactions and advisory services - rather than traditional lending.
Since then, Mr Kostin has gone on a charm offensive in Asia, where it is still relatively unknown except to big investors. One of VTB's aims is to raise the contribution of its international operations to the group's income. The group has set itself a target of earning an overall return on equity of at least 15 per cent by 2013, up from 11.9 per cent in the first quarter of this year (VTB suffered a loss last year).
'By 2013, each of our subsidiaries should bring in an ROE of at least 15 per cent; if not, we'll be closing it,' Mr Kostin said. 'I'm quite convinced that you can do business successfully everywhere, but it requires a lot of time and money, so you should really select the most profitable and promising areas.'
Those promising areas are mainly retail banking in Russia - including private banking - and investment banking, he said. VTB wants to increase the contribution to group income of both business segments, which are more profitable than its main corporate lending business.
Corporate banking made up 64 per cent of the group's total revenue last year; retail banking contributed 20 per cent, and investment banking 11 per cent.
'In our previous strategy we focused on aggressive growth and taking leading positions in the market. Now we've switched to efficiency and quality of the growth; we'll focus specifically on profitability and return on equity,' he said.
Temasek Holdings invested an undisclosed sum in the bank's shares at its initial public offering in London and Moscow in 2007, which raised US$8 billion. The bank continues to enjoy strong support from the Russian government, which injected some US$14 billion of capital into VTB during the financial crisis. The government now owns 77.5 per cent of VTB - down from 100 per cent before its IPO.
It needs no new capital until 2013, but it would 'definitely consider' a public listing in Hong Kong to raise more capital then, Mr Kostin said last Friday, according to a Bloomberg report in Hong Kong.
'Asia is important for us in a number of ways. It has recently become a capital-exporting region; before, it was mainly a capital-consuming region. So in our process of diversifying our borrowings and our international shareholder structure, we are very much focused on sovereign funds in Singapore and China,' Mr Kostin told BT.
VTB has started raising more debt capital from investors in Asia - as much as 30 per cent of some debt issues, compared to 10 per cent previously - to diversify its funding sources, Mr Kostin said. It is also exploring issuing debt in Asian+ currencies such as the Japanese yen or Korean won; it has 'no objection, in principle' to issuing debt in other currencies such as the Singapore dollar, but needs to ensure that the funds raised are easily convertible into roubles, since most of its spending is in Russia, he said.
For now, VTB is the only Russian bank with a full-fledged investment banking operation and a significant international presence. It has some 20 offices worldwide, including in Singapore, where it has 30 staff. The bank also plans to open an investment bank office in Hong Kong later this year, Mr Kostin said.
He sees opportunities to position VTB in Asia as the bank to turn to for those keen on investing and doing business in Russia. 'We very much would like to be viewed as the expert on Russia,' he said. 'That's a niche for our investment banking business here in Asia.'
Just how safe is canned soup?
Business Times - 14 Jun 2010
Studies show BPA, the key compound in the epoxy resin that lines the inside of cans, may lead to cancer. ERNEST SCHEYDER reports
(DOVER, New Hampshire) YOLANDE Sprague could be forgiven for feeling virtuous. Four years ago, just after giving birth to her second child, the stay-at-home mother heard about BPA, a chemical inside some plastics that can leach into water or food slowly over time, potentially causing serious health problems like cancer. Unwilling to take any risks, she ran to Babies 'R' Us, which had a programme to exchange baby bottles containing BPA, and walked out with US$100 in rebates.
If only life were so easy.
What Ms Sprague didn't realise is that BPA, or bisphenol A, is ubiquitous. Simply put, just about anything you eat that comes out of a can - from Campbell's Chicken Soup to Diet Coke and BumbleBee Tuna - contains the same exact chemical.
The exposure to BPA from canned food 'is far more extensive' than from plastic bottles, said Shanna Swan, a professor and researcher at the University of Rochester in New York. 'It's particularly concerning when it's lining infant formula cans.'
BPA is the key compound in epoxy resin linings that keep food fresher longer and prevents it from interacting with metal and altering the taste. It has been linked in some studies of rats and mice to not only cancer but also obesity, diabetes and heart disease.
Trade groups for chemical and can manufacturers say they stand behind the chemical, and point to some studies from governmental health agencies that deem BPA safe and effective for food contact. They also note that its use has substantially reduced deaths from food poisoning.
But in January, the US Food and Drug Administration for the first time expressed 'some concern' about BPA. Propelled in part by recent independent scientific studies and also bowing to mounting concern from the US public and consumer groups, the agency announced that it would tap US$30 million in federal stimulus funds to study the chemical's potential effects on the human body.
Prevents rust
Although it is not clear how economically stimulating the study will be, its results are anxiously awaited in industry and consumer circles. The report, due late in 2011, is being done in collaboration with the National Institutes of Health.
'BPA has not been found or been proven to harm either children or adults, but because children . . . in the very early stages of development are exposed to BPA, the data that we're getting deserves a much closer look,' Deputy Health and Human Services Secretary Bill Corr said earlier this year.
What is clear, however, is that unlike the case with plastic, there are no economically viable alternatives to the chemical in epoxy resins right now.
'If it's in baby bottles, then I can imagine it's in a lot of other things,' said Ms Sprague, who has a history of premature deliveries but is due to give birth to a boy in September. 'Everybody gets breast cancer now. It's scary. Is it because of BPA? I don't know.'
One scientist helping to lead the charge against BPA is Yale University physician, professor and researcher Hugh Taylor. His research has shown that the chemical alters the way genes react to oestrogen, and could open the door for infants in utero to develop cancer much later in life.
'I tell my pregnant patients to avoid products containing it,' he said. 'Even a fleeting exposure in pregnancy can cause lasting damage.'
The studies by Prof Taylor are certainly eye-opening. They have shown that the chemical alters the way DNA operates, a process known as an epigenetic change.
On each strand of DNA a group of carbon molecules binds to receptors that help turn genes on or off. In the presence of BPA, though, many of those carbon molecules can be removed from DNA, and with them the switch.
Think of the carbon groups as a kind of lock, and the DNA receptors as a gate. When the lock is removed, the gate can swing open, greatly increasing the risk for oestrogen to flow through later in life, interact with DNA and cause cancer.
'It has permanent, lasting effects,' said Prof Taylor, donning a white coat in his New Haven, Connecticut, lab. 'The adult exposure is concerning, but I think the fetal exposure is worse.'
To study the way BPA may affect children in utero, Prop Taylor injected pregnant mice with high doses of the chemical five days into their 21-day gestation cycle. He found that the mice exposed to BPA in the womb lacked the 'gate' on their DNA receptors and were more susceptible to oestrogen for the rest of their lives.
Since many foods contain natural oestrogen - soy, for instance - Prof Taylor believes his studies suggest complications could arise down the road simply from eating basic foods, never mind oestrogen supplements that many women take as they enter menopause. 'In the mouse models, they're more prone to cancer,' Prof Taylor said.
As a gynaecologist, Prof Taylor studied the effects primarily on female mice. The long-term impact of increased BPA on DNA receptors in males, he said, remains unknown. His research is also limited because he can't test BPA on unaffected humans. 'We all have it in our bodies, so there's no way to test a population without it,' he said. 'You'll never have the perfect experiment in humans to prove this.'
Right now he is studying just how BPA removes the carbon groups from DNA - in effect the specific process that removes the 'lock' - and hopes this will shed further light on how the chemical interacts with the body.
He acknowledges BPA's role in food safety but says people should be made aware of the potential danger. 'We always balance the risk with the benefits in our lives,' he said.'There's a price we pay for modern society and convenience.'
Frederick vom Saal, a professor at the University of Missouri who is studying BPA independently from Prof Taylor, is far less diplomatic. Known as an aggressive crusader against the chemical, he said that if BPA were treated as a drug, 'it would have been pulled immediately' by regulators.
Inside canned food, the thin layer of epoxy resin sits between the food and metal can, helping to keep the two from interacting and preventing rust. The resin is sprayed into the can and dries almost instantly. Thousands of companies, such as Campbell Soup Co and Coca-Cola, use it to line their cans. Without it, food would perish far faster. Cans lacking the chemical would explode on store shelves when contents reacted with the metal.
First synthesised in 1891, BPA is a commercial hardener, making it great to use in a wide variety of applications, ranging from plastic canoes to headlights to cash register receipts. As a key building block for epoxy resin, it acts as part of the compound's polymer base, and was first used in the 1940s in canned foods.
A breakthrough product in its day, it has also been enduring. 'There's just something about it,' said Steve Russell, the head of the plastics division for the American Chemistry Council, an industry trade group. 'When they figured it out, it was one of those 'eureka' moments.'
Because BPA has been presumed to be safe without question for so long, very little research has been undertaken to find commercially viable substitutes in canned goods. 'At the moment, there is no single epoxy resin which provides the same degree of food safety, shelf stability and cost-effectiveness for maintaining the shelf life of fruits and vegetables,' said Mr Russell.
That was not the case with plastic bottles. In that industry, replacements have been much easier to come by. Alternatives to plastic with BPA include polyethylene, most commonly used to make shopping bags, and polypropylene, which makes water bottles squeezable.
To be sure, non-BPA-based resins exist, but they are much more expensive. That's a challenge for an industry that is sensitive about price differences to the fraction of a penny.
Michigan-based Eden Foods, for example, markets beans and rice in BPA-free cans made by Ball Corp, but they cost 14 per cent more than traditional ones. With the can itself representing one of the largest costs for food makers, switching to an alternative likely would boost prices and hurt consumers - especially the legions of coupon-clippers struggling to make ends meet.
Ball Corp uses an enamel mix comprised of natural resins from pine and balsam fir trees, a mix that was used before BPA became popular more than 50 years ago. 'When you're talking about half the cost of a can of food being just the can itself, in an extremely hyper-competitive environment, it's a big deal,' said Michael Potter, president of Eden Foods. Nevertheless, the company has been able to survive due to growing interest from natural food devotees, he said. Eden still markets tomato products in cans containing BPA, noting that the FDA hasn't signed off on any other types of can linings for acidic foods. But Mr Potter says he is working with Ball on a replacement that he hopes will hit shelves in the next few years.
Unsubstantiated claims
Other alternatives are being developed. Earlier this year Michael Jaffe, a research professor at the New Jersey Institute of Technology, received a patent for a corn sugar- based resin that mimics BPA's structure but doesn't have the harmful side effects. Still, the resin is years away from commercial use, and the price of switching to it remains unknown. 'The final cost will clearly be linked to volume,' Prof Jaffe said, 'but I see no reason why these resins can't be competitive with BPA.'
Back at the University of Rochester, Prof Swan and her colleagues are studying just how much BPA is absorbed by the body depending on how much canned food is eaten. Their report is due out later this year.
For the time being, the chemical industry is not just sticking with BPA. It is also warning consumers to be wary of anything that claims to be an acceptable substitute but may not have undergone rigorous testing.
'We're all parents, and we can all understand that everybody wants to do the best for their kids,' the ACC's Mr Russell said. 'But in doing so we need to understand that we're doing it not because the government agencies around the world say they're not safe, you're doing so because in some places, some people want to be extra safe. It comes down to the degree of uncertainty that you're comfortable with.'
Part of the concern many in the chemical industry have with studies like Prof Taylor's is that they tend to use very large doses of BPA. Prof Taylor injected his mice with five milligrams of the chemical - far more than anyone would be exposed to eating from just one can.
The chemical industry maintains that BPA metabolizes very quickly in the body and is excreted before it can even interact with cells. 'The levels of chemical that you would be exposed to from using products containing BPA, including epoxy lining in food containers, is so small that all these government agencies have looked at it and have said, 'Yeah, even if all these horrible things that BPA is said to cause were true, the exposure levels are so small that we're not convinced there's an actual risk here',' Mr Russell said. 'That's why they continue to allow them to be used.'
For Yale's Prof Taylor, any amount of a harmful chemical is too much for some. 'We can argue over what is a safe dose, but if I'm pregnant, I'm going to avoid it,' he said. 'The adult exposure is concerning, but I think the fetal exposure is worse.'
Health benefits
Given this chasm, all eyes are on the FDA. The agency has long insisted that the chemical is safe, so it did not go unnoticed when it said it would use funds from the American Recovery and Reinvestment Act of 2009 to study what BPA does to the human body. 'We need to know more,' Deputy FDA Commissioner Josh Sharfstein told reporters earlier this year.
Adding to the confusion, his counterpart across the northern border disagrees. Health Canada, that country's top health regulator, bans BPA in plastic baby bottles, but earlier this month the agency said that BPA levels in canned food 'are not considered to represent a human health concern'. Leading companies and industry organisations reference both the FDA and Health Canada's current stance on BPA in plastic resin, saying they stand behind findings from those and other agencies that the chemical is safe.
'We welcome the FDA's current research into BPA,' said Scott Openshaw of the Grocery Manufacturers Association. 'We rely on the proper regulatory authorities to determine if something like this is unsafe.'
The North American Metal Packaging Alliance, a trade group for canned food and beverage makers, says BPA provides 'real, important and measurable health benefits'. 'A lot of younger people today don't even understand what a bulging can is, but most of our grandparents understand that a bulging can is a contaminated can,' said John Rost, who has a PhD in chemistry and is chairman of the alliance. 'Through the use of epoxy coatings in metal packaging, there has not been a food-borne illness case in more than 33 years.'
Nevertheless, the backlash against BPA has reached corporate America. In April, Coca-Cola shareholders rejected a proposal to force the company to issue a report on potential alternatives to BPA and how the chemical could affect market share. Executives insisted that the report would not offer any 'additional or useful information'. A person weighing 61 kg would need to ingest more than 14,800 12-ounce cans of a beverage in one day to approach the FDA's acceptable daily limit for BPA consumption, Coca-Cola said.
For BPA manufacturers, including Dow Chemical and Hexion Specialty Chemicals, the chemical is not a large revenue base. If it were banned in food applications tomorrow, both companies and their peers would likely move forward without so much as a hiccup.
According to SRI Consulting, about 4.1 million tonnes of plastic resin were used globally in 2006, the most recent year for which data is available. The industry has the capacity to produce about 4.6 million tonnes, though, and western Europe actually uses more than the US.
Still, many parents remain concerned. Just what is an acceptable amount of BPA to ingest? Should we be knowingly ingesting a potential carcinogen, even at minuscule levels? Why aren't there better, cheaper alternatives? For now, families like Ms Sprague's weigh their options every day on canned food, though experts like Yale's Prof Taylor point out that if the end result is more people eating fresh fruits and vegetables, that wouldn't be a bad thing. -- Reuters