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Interview

with Manohar Khiatani, Chief Executive Officer, JTC Corporation

24.09.2010 / Energyboardroom

Thank you for having us today! As you mentioned in the latest financial report, JTC’s performance mirrors the performance of the Singapore economy. Despite a challenging first half, you ended last year well with a surplus of more than SGD 650 million. How important was the resilience package that was implemented and how well protected is JTC today to cope with macro-economic instability?

Referring to our financial year running from April onwards, 2009/2010 was a year of two halves. The first half was still relatively weak, but as the global and Singapore economy started recovering, JTC benefited from a better second half. When the downturn hit us in 2008, the government took an integrated approach to try and minimize the overall impact and ensure there would be speedy recovery once the global economy picked up again. JTC had a key role to play and we offered support to our customers by granting a 15% rebate on rentals. JTC’s aim has always been to keep Singapore as an attractive and competitive business hub. Together with the national resilience package, it helped the industry to cut business costs and support employees etc. As a result, Singapore companies were better able to manage the downturn and respond faster during the economic upturn.

Of course we know that the Singapore government aims to privatize most functions that the private sector is able to provide itself. In line with this, JTC started divesting assets such as “First DCS” to better focus on being a strategic industrial infrastructure provider. How far are you in this divestment process today and what are some key assets of JTC you regard as “able to stand alone” in the near future?

JTC sees its role as an industrial infrastructure developer. Our focus is on seeding new ideas and developing innovative projects that can create longer term differentiating advantage for Singapore. Hence, we have Jurong Island, the CleanTech Park, the Seletar Aerospace Park, one-north and several other projects to support the growth of our key industry clusters. When the market is sufficiently mature with active private sector participation for certain industrial products, we divest the products to the private sector. Hence, besides FDCS we also divested the ready-built facilities for which there is already a mature private sector market.

A key focus for JTC is to think creatively on how to use infrastructure as a differentiating advantage for Singapore’s industries. Furthermore, land is a valuable and limited resource in Singapore. Therefore, a second focus for JTC is on how to optimally use the land resource in Singapore to achieve maximum benefits for the economy. To ensure that the infrastructure provided is efficient and can serve as a competitive advantage for Singapore, JTC works closely together with its sister agencies such as EDB and Spring Singapore to understand the developments and needs of the industry.

Moving forward, manufacturing and services will remain the twin engines of growth for Singapore’s economy. The long-term aim is that manufacturing accounts for 20 to 25% of Singapore’s GDP. Manufacturing industries have a tremendous multiplier effect resulting in more and more services such as logistics and financial services for example. Having the right infrastructure is a key element in making the entire manufacturing sector efficient and competitive. This is where JTC’s role becomes critical.

Today you have set yourself 3 key focus areas relating to land productivity, cluster knowledge, and innovation capacity. To nourish innovation, one way is to obtain new ideas from Singapore-based companies, which is why you have set up the Innovation Fund. How well has this initiative been received and what is your perspective on the projects that will be coming out of its pipeline?

We have received very interesting ideas under this initiative. We maintain an Open Innovation policy, meaning that we want to reach out to people in the research institutes, universities, private sector to share their ideas with us. With this initiative, we hope to seek new inspirations to complement our in-house ideas and boost industry research in optimizing, intensifying and creating new industrial space. For example, while Singapore started off with standard factories initially, we realised that not all activities required ground-level access. This was how JTC came up with the ramp-up factories. As soon as the industry saw that it worked, private developers started to increasingly develop this concept, leading to different variations. Today, JTC is even looking into hoisting systems to replace these ramps and take the innovative design another step further. At the end of the day, this will result in greater land efficiency and, with that, lower prices.

Since last year, JTC has consolidated its business arms into strategic industry clusters which include aerospace, biomedical, chemicals, marine, cleantech, electronics, infocomm and media. This has enabled us to obtain a deeper understanding of the specific industries. This, together with our focus on innovation, will enable us to engage our customers better and develop unique infrastructure solutions for companies or industries.

Speaking about Singapore’s clusters, Jurong Island is obviously a good example, housing 94 chemical companies. A remarkable project that was not just about land reclamation, but also about helping companies to create synergies and save costs. What has been your secret to success and what remains to be done to achieve a critical mass of higher value chemical chains?

Singapore, with its strategic location, started off as an oil refining centre. The capabilities and raw material acquired in this niche were subsequently used to grow the petrochemical industry. When we decided to grow the petrochemical industry as a new cluster for Singapore, we knew we needed to have sufficient land. That’s where the idea of Jurong Island was born. Jurong Island started off with a vision to join seven islands, with a landmass of some 900 hectares to one land mass for the petrochemical industry by 2030. However, we received strong interest from industry and the reclamation was completed much earlier resulting in more than 3000 hectares today. Consequently, the chemical industry has become one of the biggest industries in Singapore, accounting for approximately 27% of the nation’s manufacturing output.

The ‘formula’ for Jurong Island was integration – i.e. buying and selling ‘over the fence’ – and the use of common shared facilities and services. By having central facilities providers, companies avoid spending money on non-core activities. The central provider brings a double blessing since it does not only reduce investment costs for companies but also results in a critical mass leading to further cost reductions. These elements were key factors in the success of Jurong Island.

However, the Singapore oil and gas industry is not only about refineries and petrochemicals. Closely integrated with these industries is the whole oil and gas equipment/services chain. Singapore has made a deliberate effort in developing this comprehensive value chain.

First, there are the seismic surveying companies of which all the majors have significant operations here. In the exploration space, our shipyards are world leaders in jack-up rigs and semi submersibles. On the oil/gas production side our shipyards have a dominant position in the conversion of FPSOs. Furthermore, Singapore is the leading location in Asia for oil and gas equipment and service providers such as FMC Technologies, Cameron, Dril-Quip, Halliburton, Schlumberger and so on. Rounding up the oil and gas eco-system are companies such as Transocean, Modec, APL that all have a significant presence in Singapore.

It is this full value chain of the extended Oil and Gas industry that makes Singapore so unique.

Moving forward, Singapore recognizes the importance of the chemical industry but is also cognizant of the challenges it faces. First, there exists the challenge of resources, be it land, water, energy, etc. In addition, there is an increasing push towards more environmental-friendly and sustainable solutions. To ensure that Singapore’s chemical industry remains competitive and sustainable, we have embarked on the “Jurong Island V2.0” initiative. This initiative will look at 5 key areas i.e. energy, logistics and transportation, feedstock options, environment and water.

We are also looking at solutions that can optimize land use. An example of this is the underground rock caverns on Jurong Island for the storage of oil. For the first phase, we are looking at a storage capacity of around 1.5 million cubic meters. The purpose is to provide enough capacity to store what Singapore needs to develop the chemical industry while addressing the issue of land scarcity. Another initiative currently under consideration is the Very Large Floating Structures.

For the Offshore and Marine industry, we are developing the 13 ha Offshore Marine Centre, which will have common waterfront access and facilities. This is an example of how we can help reduce capital costs for our customers and at the same time stretch our limited waterfront resources.

This is interesting because when we met John Chan of Intertek, his dream was also to see one big testing lab for Singapore! Are shared facilities the future? What role can JTC play?

We cluster activities within the same industry where it makes economic sense and for companies to take advantage of the economies of scale. For example, we hope to create synergy at MedTech Park by housing equipment manufacturers, suppliers and other supporting firms together. Common facilities will allow med-tech companies to have a faster start-up and save costs. We are also looking at doing the same for surface finishing companies which also have common requirements such as water treatment and metal recovery. So yes, where appropriate, this is an approach we aim to pursue in the future.

Moving forward, we’ll obviously see the industry becoming even greener. How is JTC adapting to this trend and to what extent do you feel that you are setting an example with the CleanTech Park towards a greener Singapore?

The underlying idea here for CleanTech Park is that it has to be both ecological and economical. CleanTech Park is a business park with significant cleantech features located next to NTU, a leading university in Singapore with strong capabilities in clean technology. Being so close to NTU provides a synergy that allows for another clustering concept. We are targeting 3 types of companies for Cleantech Park.

The first category of companies consists of purely cleantech companies in areas such as clean water, clean environment, clean energy and so on. Asia is a growing market for these companies and establishing themselves in the CleanTech Park is obviously a great advantage as they can create synergies and work together towards cleantech solutions. The second group of companies comprises companies with a strong focus on cleantech, but which are not cleantech companies by definition. Examples of such companies are automotive companies. The third category consists of companies who want to be at a location like Cleantech Park because of their corporate image.

CleanTech Park will also be a living lab for companies to try out solutions on a larger scale, away from the laboratories and in a real scale environment. JTC itself will be trying out some of its innovative ‘green’ ideas at the Park. This includes our sky trellis, solar thermal façade and stormwater harvesting.

A bright future ahead where your key asset, your people, will obviously play a key role! We see they have already enabled you to win several prestigious awards. Can you therefore explain what makes the JTC staff so unique?

JTC is fortunate to have very capable and dedicated staff. First, JTC is very clear on its vision which drives the entire company. JTC has always played a critical role in the development of Singapore. The name itself stems from Jurong, which is the cradle of economic development in Singapore. We know that we are critical to ensure the future of the country. We also know that we have to continuously evolve and be future-ready and that the next phase is not just about efficiency, but also about innovation. This is what drives us.

To wrap up, we congratulate you because in 3 weeks you will be able to celebrate being CEO of JTC for one year! How satisfied are you personally, looking back on this year, and what would you like to achieve in the coming years?

The thing about JTC and agencies such as EDB and Spring is that they are part of the same value chain. Their role lies in defining and developing Singapore’s future. This is the main aspect that drives me!

The reorganization that we undertook last year has certainly helped us. All the aforementioned initiatives and ideas have been developed as a result of this. So we have made progress but we still have a long way to go. We have to position JTC as a driver of innovation too, rather than efficiency alone. This is now taking shape and we are optimistic that we will be able to deal with the “challops” that will arise. Challops is what we define as the mix of challenges and opportunities that the future will bring.

Where will we see Singapore in 5 years from now and where would you like to see JTC’s involvement?

If you look at Singapore, we want to evolve from being just a good host to also a home for companies. This means that the kind of high-end activities that most companies would normally do from their home base will be done from here. As an industrial infrastructure provider, JTC aims to provide efficient and innovative infrastructure solutions that will make Singapore a uniquely competitive and attractive home for these companies.

Do you have a last message for the readers of Oil and Gas Financial Journal?

The oil and gas industry is critical for Singapore and we have a very unique and integrated value chain here. I would like to encourage all those companies, who have not yet considered Singapore to come and take a look at how Singapore could support their growth.

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