BUSINESS: Asian Conglomerates: Computers and Croissants
Far Eastern Economic Review
Aug 13, 1998

Computers and Croissants
  * By Salil Tripathi

    300 Words


Nicholas Lee enthuses about the synergies achieved by companies
belonging to Singapore's government-linked Sembawang group. Lee, who
heads one of the companies, Pacific Internet, says his outlet in a
downtown shopping mall faces an outlet of the Delifrance cafe chain,
another of Sembawang's companies. "You can pick up a notebook computer,
go to Delifrance, and have a cup of nice coffee and croissant, and
surf," he says.
   Talk about stretching a concept. Sembawang has done so since 1994,
the year Singapore's top economic bureaucrat, Philip Yeo, took over as
chairman. The group ventured beyond its traditional shipyard business
into marine and heavy industries, engineering and construction, property
and building materials, transport and logistics -- and media and
restaurants. In the process, its liabilities rose to S$3.8 billion ($2.2
billion) in 1997 from S$1 billion in 1994. It earned after-tax profits
of only $33 million last year, while its stock price has fallen to
around S$2.50 from S$15 in 1994.
 So when Singapore's mandarins decided that state-controlled companies
had to become more competitive, Sembawang was a prime candidate for
reform. In June, it announced it would merge with Singapore Technologies
Industrial Corp. to create SembCorp Industries, the region's biggest
infrastructure player.
   The new group will have to begin by divesting noncore assets,
analysts say. Wong Kok Siew, the chief executive officer-designate, says
SembCorp will focus on four areas: infrastructure, marine engineering,
information technology and lifestyle. "To make the new entity leaner and
trimmer, we will be looking within each of the four businesses to see
how we can rationalize operations."
   But analysts are hard put to see how SembCorp's four new core areas
differ from Sembawang's five old ones. They still encompass businesses
as disparate as cranes, computers, coffee and croissants -- a corporate
strategy based more on alliteration than synergy.