Six of Singapore's top ten listed companies by market capitalization Ä Singapore Telecommunications, DBS Group Holdings, Singapore Airlines, Singapore Press Holdings, ST Engineering and Chartered Semiconductor Ä are wholly or largely owned by the government.

Altogether, government enterprises account for 12.9 percent of Singapore's GDP.

Economists contend that the government would create more growing room for private-sector initiatives if it were to substantially divest its company holdings.

"Singapore has grown big because of a high degree of public-sector control," says Christopher Gee, head of research at ING Baring Securities (Singapore). "This has crowded out the private sector and stifled entrepreneurship."

To blunt such criticisms, the blue-ribbon Economic Review Committee appointed by Prime Minister Goh Chok Tong to study Singapore's options is likely to recommend a tougher law to promote competition.

Minister of State Raymond Lim, whose ERC subcommittee is investigating this notion, says such a law could help ensure a level playing field and provide the regulatory muscle to tackle abuses of market power.

"This is one of those things that, if done properly, could have a big positive impact on the private sector," says Rajeev Malik, a senior economist with J.P. Morgan Chase Bank in Singapore.

But bolder measures seem unlikely for now. Minister of Trade and Industry George Yeo acknowledges that the prospect of divesting the government's prime assets is a thorny issue.

"Should we now divest quickly?" he asks. "There's no agreement even among the ministers as to how this should be done. My own instincts are that they are all precious assets, and as many of them as possible should be developed into multinationals, and in the process the government's stake in them should be reduced."

Yeo doesn't want the companies to lose their Singaporean character, however: "If they were divested and became part of American or Japanese or European MNCs, for which this is just another acquisition, and Singapore is not a key element in their global plan, we would have lost out as Singaporeans."

The government does appear to be inclined to pay more heed to the concerns of government enterprises' minority private shareholders.

Investors have criticised the companies for paying excessive prices for overseas assets in a bid to carry out Singapore's long-term strategy of building an "external wing" to the economy to become more competitive.

Investors have had reason to be upset. DBS Group's acquisition of Hong Kong's Dao Heng Bank in April last year for a rich 3.2 times book value caused DBS's share price to plummet 10 percent (Institutional Investor, February 2002). The 50 times 2001 earnings that Singapore Telecommunications shelled out for Australia's Cable & Wireless Optus in March 2001 sent its share price tumbling 25 percent.

Investors don't dispute the government's assertion that Singapore's tiny market is near the saturation point and that major domestic companies have little alternative but to expand overseas.

But they still object to the steep price paid for acquisitions that may not pay off for years and suggest that if the government wants to temper criticism, it should set clear targets for shareholder returns at government enterprises.

One banking analyst proposes that Singapore follow the example of HSBC Holdings and set a target of doubling shareholder value every five years.

The holding company through which Singapore maintains stakes in government enterprises, Temasek Holdings, is planning to introduce benchmarks along these lines.

"They are looking into setting clear perfor-mance benchmarks," says a government source. "They will set the benchmark, and they will then tell the management, 'Go and hit the benchmark. And if you don't, then why?'"

Successful entrepreneurs, of course, learn soon enough to pay attention to shareholders.

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