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SINGAPORE : There is a cap on how much profit Mr Ong Beng Seng can earn from staging the Singapore Grand Prix. This is part of the co-funding deal between race organiser Singapore GP and the Government.
Any amount earned above this profit cap, which is confidential under the terms of the deal, will go to reduce the Government’s future grants. Any losses incurred, however, will be borne by the organiser.
TODAY discovered this “never revealed before” detail during an exclusive interview with the executive director of Singapore GP, Mr Michael Roche, about the most talked about deal in town.
Mr Roche was responding to growing criticism that the Government had committed millions of dollars of taxpayers’ money each year to co-fund a private entrepreneur’s business deal to stage the Formula 1 race, and in doing so, was allowing Mr Ong Beng Seng to make a tidy bundle on the deal.
“We can’t run away with $50 million and say, ‘Ha, ha, got you there’, it is not like that ... We have a (profit) cap. We have a small amount of profit and then they have government claw-backs,” he said.
“If our budget estimates turn out to be off the mark and there is all this profit, it all goes back to the Government ... It will flow back, and affect (reduce) the following year’s grant from the Government.”
It will cost about $150 million each year to stage the F1 race here. The Government has committed a grant of 60 per cent of this cost, or $90 million, with Singapore GP footing the remaining $60 million.
Sources close to the deal told TODAY that the single most expensive item on the $150 million bill is the hosting rights paid to F1 supremo Bernie Ecclestone — this is believed to be US$35million ($53 million) a year.
Mr Ecclestone’s F1 company also creams off millions of dollars in billboard advertising along the race circuit, generic F1 merchandise and the international television rights.
The rest of the bill is the cost of staging the race. Race organisers will have to make their money from ticket sales, Singapore Grand Prix merchandise, food and beverage, and sponsorship.
“In Melbourne, it was the Fosters Australian Grand Prix. Now ING is the title sponsor. Our intention is to push for a major Singapore company to buy the title sponsorship ... ” said Mr Roche.
“If it is Singapore Airlines or DBS Bank, or some other big local company, they would have the exposure,” he added. Regional F1 organisers told TODAY that title sponsors generally pay between $7 million and $15 million a year to have their name associated with the race and its merchandise.
So, what does the Government get out of co-funding the race?
Perhaps the biggest hint came from an email sent out by a senior Singapore Tourism Board official on April 4 during the close door negotiations to secure the F1 race.
The email, which TODAY obtained, said: “As international television exposure is a primary objective for our grant support, we must have the appropriate signage to indicate to the world that the race is in Singapore (the beauty shots of skyline, landmarks are critical too of course, but we need people to know that it’s Singapore).
“A single signage is therefore not sufficient, especially since it’s not even guaranteed that it’s at the start/end point vicinity.”
When asked about this, Mr Roche, however, declined to elaborate citing the strict confidentiality of the negotiations and the deal between Singapore GP and the Government.
It is understood that an international consultant’s opinion has been sought to help light up all the major buildings along the street circuit to illuminate the skyline and create a uniquely Singapore backdrop, which will be seen by the hundreds of millions of television viewers who tune in to each F1 race.
Yet there are those who have voiced reservations in cyberspace forums, who say the intangible returns to the island’s image and buzz do not justify the Government footing the bulk of the bill.
Much has been written about the economic multiplier effect that staging the grand prix will have on tourism receipts, which the Government estimates will increase $100 million a year — part of which comes from a special F1 cess to be levied on hotels lining the 5.2-kilometre downtown street circuit.
But as with official growth forecasts, economists say the $100 million estimate is conservative.
Mr Roche, who along with Mr Teo Hock Seng and Mr Colin Syn, form the triumvirate of Mr Ong Beng Seng’s team tasked to stage the Singapore race, also pointed to the bigger picture. The organisers aim to sell 100,000 race tickets, with at least 40,000 spectators coming from abroad.
“Many, many sectors of Singapore business will enjoy a knockon feel-good factor,” said Mr Roche.
“We are trying to bring in at least 40 per cent of the spectators from overseas. This will have an impact on hotels, through beverage, entertainment, nightlife, airports, Singapore Airlines. There will be upside to our spa business, our retail business. And everything has a GST component, so it makes sense at the end of the day to the Government. And you know, our Singapore Government does not take things lightly, they studied it, and restudied and restudied it,” he told TODAY.
While the Government’s stake is more or less fixed, race organisers face heavy losses if costs escalate.
“If there are any losses, we are on own. If there is a bad year, it can be anything, another Asian financial crisis, terrorism, a Sarstype scare, we may never really recover from it,” he explained.
“We are not entering into the Singapore Formula 1 Grand Prix with the idea that we are going to make fortunes and be able to retire from it, or anything like that. There is a high level of risk, we understand that but there is also an upside,” he said.
“The Government has been very accommodating, trying to balance its grant to give us certain comfort levels to go forward.”
“The Ministry of Trade and Industry and STB have always said, ‘Look we are not going to set you up to fail. It would be terrible for all of us if it doesn’t work,” said Mr Roche. - TODAY
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