Little Economy For Distribution

The Big Little Economy (24th Sept 2008)

THE PRECIOUS CHILD

A convergence of falling birth/fertility rates + technology advancements + increasing global affluence could lead to unique market and strategic opportunities arising from the Little Economy1.

1 Children - defined as pre-0 to below 15 years of age

Since the 60s-70s, fertility rates have fallen worldwide

• 1970 to 2000 - “major and unprecedented fall” in global fertility rates.

• A trend in both the developed and developing world. • No European country is maintaining its population by birth.• Fertility < 2.1 in 23 developing countries including China (fertility = 1.7 in 2000-2005).

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Source: World Fertility Patterns 2004, UN Population Division

Europe Pacific

Asia

U.S.

Americas

Africa

The fall is global and will persist into the future

Shrinking Global Population

Source: World Population 2004, UN Population Division

• In 2000-2005, world fertility = 2.65 (Developed – 1.56; Developing - 2.58; Least Developed – 5)

• By 2040-50, world fertility < 2.1 (replacement rate)

For the country, shrinking population poses a real threat

• “The rapid ageing of the developed world is pushing the global economy towards the edge of a demographic abyss.” (Commission on Global Ageing)

• In the next 10 years, the population of Japan will start to shrink, followed within the next few decades by the EU and even China.

“2/5 of all U.S.

counties are shrinking…. Children are disappearing even more quickly.”

“To Shrink a City”, The Economist

“Ogama in Ishikawa prefecture canvassed an industrial-waste company

from Tokyo to. .replace replace its paddy fields, cedarwood plantations..”

“… administrators are starting to think about the implications of population decline…. set about trying to shrink the city. …...

“Sullivan County Australia

…. population has virtually flat-lined…”

Various drivers have contributed to this fall...

Drivers • Improved status of women (higher education, career opportunities)

• Rising income and wealth

• Use of contraceptives, legalization of abortion

• Technology advancements (mechanization)

• Government policies (e.g. state-sponsored housing, childcare)

“..beginning of the decline began in the late 60s with the advent of the pill”

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• Global average infertility2 rate is 10-15% and rising.

• Fertility - linked to social, behavioural, biological, environmental factors and increasingly, genetic factors.

.. including Rising Infertility Rates..

National Infertility RatesU.S. >10%

Europe 1 in 7 couples, could double over next 10 yrs

Singapore 20%

China 10%

Sub-Saharan Africa 20%

2 Infertility is defined as 12 mths of unsuccessful conception for women < 35.

“From 1988 to 1995 (7 yrs)…, American women.. (with) fertility problems jumped from 4.9 mil to 6.1 mil, a 25% increase.”

“American men are becoming less fertile and more likely to experience testicular cancer than their forefathers…”

• ‘The field of reproductive technology has become a fast growing and profitable economic sector’,… human reproduction, would unleash a new cycle of market creation, exuberance..’ (Harvard Biz School Professor)

• … an increasing demand for ‘designer babies’, choosing SAT scores, character, etc.

• Other related industries – fertility drugs, selling of sperm/egg, stem cell research, cord blood banking, cloning, cross-border adoption, surrogacy,…

.. that spawned the birth of the Baby Business/Market..

Patients at Third Hospital, China's biggest authorized fertility center and its first to produce a test-tube baby.

Louise Brown, now 29, is the world’s 1st test-tube baby. Her birth heralded the taking off of the IVF industry in 1978.

“Demand knows no limits. Couples will mortgage homes, sell cars, deplete savings..”

UNITED STATES• In 2004, > 1 mil underwent ..fertility treatment. “(Market is)… growing at dizzying rate….”

.. which is fast-growing, lucrative and very international.

U.S. US$3bil fertility market, 2004IVF US$1.04 bil

Fertility Drugs US$1.33 bil

Diagnostic Tests US$375 mil

Donor Eggs US$38 mil

Donor Sperm US$74 mil

Surrogate Carriers US$27 milSources: ‘The Baby Business’, Debora Spar, Harvard Business School Press, 2006

‘How to Pay for Kids’, Businessweek, 15Nov07The Trade in Infertility, Newsweek, 12Apr06

Average sperm: $300Average egg: $4500Premium sperm: $2,950Premium egg: $50,000IVF cycle: $12,400Surrogates: $59,000Adoption: up to >$40,000Embryo storage: $250

Having a baby to call your own: Priceless

BRITAIN• The Sunday Times Rich List in 2004 announced that fertility treatment had become the most lucrative

medical speciality. Top 2 richest doctors plus others were fertility experts.• Industry worth £500 million in 2004 (£3,000 for 1 IVF cycle)

ASIA –

INDIA, SOUTH KOREA, THAILAND • “.. becoming big business in India .. Industry brings > $450 million a year into India..”• “In India and South Korea, fertility has become a fast-growth export industry.”

The Baby-Making Industry is a highly Exportable and Tradable sector due to international differences in product availability, price, quality, regulations.

.. which is fast-growing, lucrative and very international.

Popular fertility treatment destinations

Denmark For donor insemination (well-regulated, quality-checked and guaranteed to be anonymous). Cyros Int’l is world’s largest supplier and exporter of sperm.

Spain For eggs (£800 payment ensures supply of eggs)

U.S. For advanced technology and selected fewer restrictions (e.g. California – signed surrogacy agreements offer guarantees of ownership, gay/lesbian couples can hire U.S. surrogates). Though payment is technically not allowed in U.S., compensation can be very high.

India For surrogacy (> doubled over last 3 yrs). Permitted and inexpensive. IVF costs 1/5 of that in UK.

E. Europe For eggs. Some U.S. clinics fly frozen sperm to fertilise eggs in e.g. Romania. The resulting embryos are frozen and flown back to U.S. to be implanted in the womb.

“Shanghai has slammed the door on IVF applicants until 2009, citing a shortage of high-quality donated sperm….”

“baby-shoppers ..assemble inputs from around the world - sperm from Denmark, an egg from Russia, a surrogate mother from California.. some even switch countries midway through treatment, starting in Britain, .. travelling to Russia, Spain or America.”

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“Japanese scientists create ‘artificial womb' for IVF eggs”

Straits Times 28 Jul 2007

Other new products and services have sprung up rapidly in the reproductive and related sectors

FertilitySCORE™ is the 1st “at home”

male sperm test kit

(Australia)Stem Cell Extraction and Storage…. from adult blood; fat removed by liposuction; children’s baby teeth; leftover embryos; and most recently, menstrual fluid. Charges range from $600 to > $8,000.

U.S. frozen sperm

and related services internet market alone estimated at US$45 mil in 2002 (that’s 70% of the $65 mil sperm-bank services market in the U.S.).

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Cord Blood BankingPrivate banks charge $1000->$2000 for “statistically very low possibility of future need ”.

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.. which is fast-growing, lucrative and very international.

And for the individual, each child becomes more precious.

With increasing affluence, parents/grandparents are spending a whole lot more on children …..

Adoption: $22,500Childcare: $47,300Clothing: $14,683Education: $44,465Fertility: $17,500Healthcare: $20,353Toys: $39,182

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U.S. infant/toddler clothing sales outpaced the adult-apparel market

in 2006.

INDIA: Children’s birthday parties > US$4,000, iPod Mini as party favor.In a country of 1.1 bil where 32% < 15 yrs old, party planners say that the birthday industry may one day rival the wedding industry

($11bn a yr).

Worldwide market for edutainment toys expected to reach $7.3 billion by 2011.

.. $600 billion of adult spending is now "influenced" by children. ‘Junk Culture’, Time Magazine, 4 Oct 2004

Families (rich/poor) spend 1/3 to ½ of incomes on their children. 2 in 5 Koreans have no nest egg for old age, having spent it all on children.

Rich kids, poor kids• 86 countries have not achieved

universal primary education. • Under-nutrition still affects 143 mil

kids < 5yrs old.

American teenagers spend > $150 bil a yr or > GDP of Finland, Ireland or Chile. Enquirer (Sept 2005)

Education, especially, is a huge and growing expenditure• In India (Chennai, Delhi), good preschools charge 10 times more than colleges and double

the fees of leading education institutions like the Institute of Info Tech.

• In Hong Kong – parents spend up to HK$33,000 a mth per child on education incl. school fees, English lessons, revision courses, music, swimming and ECA. Expats are also paying for debentures for int’l pri/secondary schools (price of which rose from HK$600,000 in 2004 to HK$3 mil in late-2007).

• In South Korea, it costs S$370,000 to bring up a child (17% rise from 2003) in 2007. School fees form the bulk. The private tuition market is 33.5 mil won or 4% of GDP - exceeding even the entire state education budget of 31mn won for 2007. The private English education market is US$15.8 billion (S$22 billion) a yr, fuelled by families who spend an average of 700,000 won a mth on their children.

And for the individual, each child becomes more precious.

Typical total spending on a child by age (S. Korea)

Age 0-2 S$36,000

Age 3-5 S$43,000

Elementary School S$90,000

Middle School S$50,000

High School (Age 15) S$57,000

University S$94,000

S$219,000

S$151,000

“… costs of raising children can add up quickly. The biggest and most common driver is education.” The Million Dollar Kid, WSJ.

“AMERICAN cities seeking fast growth thought they had the answer in the young, single professional. But … when singles marry and raise kids, they move home, dashing growth trajectories. The result is that big cities like New York, Los Angeles, Boston and San Francisco lose out.. The lesson for urban planners seems to be that family-friendly cities win over the cool, hip cities, said Mr Joel Kotkin, a noted expert on urban economic trends.”

And for the individual, each child becomes more precious.

Not only do parents spend more, they change their lifestyles to suit the needs of their children

“Britons leaving this... ...for this”

(ST Dec 13, 2007)'For young families, especially, the chance to raise a family in a safe, out-of-doors, sporty country where your income allows you a more enjoyable standard of living is very attractive.‘…

Unfortunately, as many as half of them (working professionals) leave for the suburbs once their children reach school age - CEOs for Cities’ “Kids in Cities” Report

HONG KONG - Actor Jet Li secretly moved to SGP last yr for his daughters' education (Hong Kong's Next Magazine)

“Hedge fund bosses want to move to SGP (from HK) for their children's sake”, Straits Times 27 Aug 2007

“HK and SGP find the price of success may be just too high”

Newsweek Int’l, Aug. 6, 2007Education, once an afterthought in expatriate relocations, has rapidly become a vexing issue in both cities. Hong Kong's competitiveness is being negatively affected by the inability of incoming investors to find places in school for the children of their expatriate staff members..

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Assisted Reproduction

Industry

Early Education Industry

Kids’

City General(Blue Sky Potential)

IDEAS AND IMPLICATIONS

1. The baby- conception market is set to grow further.

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Assisted Reproduction

Industry

We have strong existing players and strengths in related technologies and services

“New local invention extracts stem cells with placenta 'juicer‘”, ST Jan 15, 2008The 2 NUS academics patented the device last year. 3

companies from SGP, Japan, Britain are keen to develop it..

“World’s 1st mother-daughter egg donation”,

April 2007 performed in Canada by SGP- trained doctor Dr Seang Lin Tan

“Out in 450 seconds”ST Dec 14 07KKH performs a 'crash caesarean' under 8 mins (int’l norm is 20-30 mins),

“Infant medicine among 4 to get sub-specialty recognition”,

ST Oct 15, 2007SINGAPORE will recognise … Neonatology, the care and treatment of newborn infants, in which Singapore is already the best in the world..

"Singapore scores medical first”,

Agence France Presse, Aug. 14, 2001 NUH and SGH.. transplanting umbilical cord blood from a non-related donor to successfully treat thalassaemia..

delivered Asia’s 1st IVF baby in 1983)

Why the baby-conception industry?

We can capitalize on our reputation for high-standards and trustworthiness to gain a further premium

By growing the sector and raising the standards, we can help improve the service for ourselves and perhaps boost our population.

“About 15 per cent of Singapore couples do not get pregnant successfully within 12 mths

of trying to have a child” (SGH website)

Why the baby-conception industry?

“The industry in China is believed to be huge.. more than 10 million Chinese families need artificial fertilization, according to Xinhua News Agency. There is a Sino-US joint venture hospital which treats more couples than any other in China”

Source: Fertility industry takes off in China, ChinaDaily, 30 Mar 2005

Diagnostics and AR procedures

Diagnostic AR Procedure

(Done in SGP or by SGP-trained doctors) (Done in SGP)

1.5-2 weeks 1.5-2 weeks(extraction)

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“In a few years there may not be many countries left that perform

the latest AR techniques. The ones that remain -

like Israel, perhaps -

may see business boom.”

2. Early education is the most lucrative and fast-growing of children-related industries.

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Early Education Industry

The fundamentals have changed. It is now a highly lucrative and growing market that is within reach of the masses.- one of the most price inelastic, next to Health/Medicine- service based on want, not need (> limiting)- commands premium fees, skills-based

Schools in SGP Annual Fees

NUS (Arts & Social Sci) S$6360

NUS Masters Prog S$5450

Australian Int’l School SGP (Pri) S$21,088

SGP American School (Pri) S$19,450

Pat’s Schoolhouse S$16,080

EtonHouse S$18,000

GEP preparatory course: $1,500 for 8hrs

“The Kindergarten Express”,

ST 27Jan07The lucrative preschool industry..draws 40,000 new pupils a yr, is riding a wave of change....the early childhood scene has never been so vibrant

“Expat school offers guaranteed place for a cool $165,000”

Tanglin Trust School starts scheme... ST Dec 15, 2007“Price of a place in United World College? $200,000”

.. ST 11Jan08

There's preschool, there's play-school and now there's Baby School ST 30Dec07There are 111 infant schools that incorporate learning.. up from just 19 in 2003…fees range from $1,000 to $1,400 a mth… almost all 20 infant schools are full with waiting lists…

Why the early childhood education industry?

SGP education fever. catching on among Koreans....parents’ annual family income > S$145,000. .. mthly expenditure of a mother here with a child > $5,000. The fathers shuttle.. every weekend… ST 23Jan08

“MBA for tots?”, ChinaDaily, 4Oct06Children’s EMBA, an early business administration program for kids aged 3-6 appeared in Shanghai (fees US$2,500),

We have very strong existing and emerging players (reputation) - Private: EtonHouse, Julia Gabriel, Chiltern House, MMI, CherryBrooks, Mindchamps, - Public: SOTA, Junior Sports Academies (JSAs), Future School

“Students prepare for opening of Arts School”, ST 21Dec07(4 arts disciplines: dance, music,

theatre and visual arts)

“A peek into a School of the Future”, ST 28Dec07.. adopt technology to spearhead innovation in teaching and learning.. The 5 ‘Future Schools’ are Beacon, Canberra Primary, Jurong Secondary, Crescent Girls' School, Hwa Chong Institution.

“Junior Sports Academies to nurture champions”..4 JSAs.. focus on 6 sports - badminton, netball, swimming, table tennis, track and field, and wushu, ST 28Deb07

“New school to nurture inventive Minds”,

School of Science and Technology to have practice-oriented focus, small class sizes, ST5Mar08

“Bar raised for preschool centres

and teachers”

ST5Mar08

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Why the early childhood education industry?

It is a highly tradable/exportable market- national branding of education is catching on- parents increasingly willing to send their children for good environment and services- companies can easily expand overseas to capture more returns for SGP

“Koreans sold on an education in Singapore”, ST Jan 23, 2008

“Temasek

buys 12% (S$512mn) of ABC Learning”, becoming the 2nd largest single investor in the world's

largest publicly traded childcare provider, ST Jun07.

Cherie Hearts is among the growing number of SGP kindergartens exporting their own pre- school curriculum.. It joins .. Kinderland, Modern Montessori Int’l, Learning Vision who have set up centres in .. M’sia, Hong Kong, Australia, China, India, Sri Lanka, Bangladesh, Nigeria

“Indian-style education system catches on in Japan”, ST Jan 3, 2008

Increasingly active M&A scene

U.S. buys into SGP SGP buys into SGP SGP buys into Australia

“Hong Leong Group makes its foray in to education”, Jun07

Why the early childhood education industry?

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Source for short, high quality program providers

to launch programs in SGP (e.g. MENSA for kids, John Hopkins, Warwick)

Attract related events

to establish SGP as a node for premium early education activities (e.g. WCGTC World Conference, World’s Children Festival, Third Arts Olympiad Artworks)

B.

Help develop a premium national brand

for our private early education providers and to explore grooming a through-train institution in the long term.

800 attendees in 2007

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3. Countries are seeing the demographic threat. Responses include building child- friendly infrastructure and branding cities child- friendly.

Kids’

City

Attracting children helps to attract talent (their parents) and we have existing strengths to leverage on

Mr Joel Kotkin, author of The City: A Global History, said Singapore has an 'underestimated secret weapon'. 'Its family-friendly image is a big plus. Many expatriates speak of this and it is a factor in attracting and retaining talent,'

"About 1/2 of white families leave Chicago when their children are school-age," says Commissioner of Children and Youth Services.

'Those who reject HK are the ones with families,' said Mr Quane, 31. 'Pollution used to be the main reason, now education is coming to the fore.'

AmCham says the lack of int’l schools here is becoming a ‘fairly acute’ problem. Some foreigners turn down job offers, others put off relocating here, Todayonline, 31Aug07.

Leaving for children’s sake….

“Asia's 1st

garden for children opens here”

ST 2Oct07

Branding cities child-friendly

Germany, Stuttgart (government)

“City for Children” Committee - drive Stuttgart as the “Best place in the world for children” to live in by 2010. “Believes.. will convince foreign talent to stay”:

• Create ‘Children Oases’ around city• Boost toddler care places, extend after-school care• Intergenerational centres incorporating elderly housing with kindergartens • Assimilation programs for expat kids (45%)• Children’s forums to canvass views on city planning

Countries are investing resources and efforts into child-friendly infrastructure and environment for children

Canada (government)“Child-Friendly Cities and Participatory Planning and Design in Canada”Research program funded under the “Initiative on the New Economy” Program 2002-2005. The research recognized that kids/youths are not future citizens—they are active citizens here and now.

“Winnipeg’s Art City: Children, Art and Urban Revitalization”

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Developed and developing countries alike are branding themselves “Child-friendly”

Philippines started the ‘Most Child- friendly City’ award in 1999.

“Few subjects.. are of more passionate interest to our readers than how to raise their kids”

Unicef’s

“Child-Friendly Cities Initiatives (CFCI)”• CFC (launched in 1996). In high-, middle-

and low-

income nations alike, a growing number of municipalities have made the political decision to become "child friendly".

“The Real Brain Drain - Why Putting Children First is So Important for Australia”

867 Child-Friendly CitiesAustria, Belgium, Finland, France, Ireland, Spain, Norway, Netherlands, Italy, Sweden, UK, New Zealand, Australia, Japan, Philippines, Thailand

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To build more child-friendly zones/infrastructureDesigns by ‘Carve’, Dutch company

“Cities ramp up kid-friendly hospitality”, By USA Today

After > a decade of wooing young professionals with loft apartments, nightclubs, Internet cafes, cities are .. new challenge: hanging on to them once they start having children

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“What makes a great city tick?”,

ST Jun 07, MONOCLE Top urban elements for an ideal city:

• Green space projects, • Clear city signage, • Child-friendly shops and services

Wannado

Cityrun by children aged 4-11, includes government, entertainment, schools, retailers, bank, post office, hospital, etc

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Enrich and enhance our city branding

(multi-dimensions) for children

Branding cities child-friendly

4. There is no premium cap to the children’s market. It is where the blue ocean strategy works best.

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General(Blue Sky Potential)

a) Media / TV / Online Networks

In 2005, The Wiggles

earned > AC/DC + Nicole Kidman (Australia's richest entertainers).

Belgian Foops!, the 1st social networking site for GEN Z (signed up > 12,000 born and unborn babies). “Rush to create virtual

playgrounds for kids”, ST 1Jan08

• “KGOY”

- Kids Getting Older Younger• “Trans-toying”

turning everyday objects into toys

A Marketer’s Dream…

In 2006, Nickelodeon’s business surpassed MTV’s.

• MTV and Nickelodeon (SEA): young audiences are the “darlings of marketeers” as they are really the decision-makers in the family.

b) Nutrition / Health / Medicine / Therapy

“Use of hyperactivity drugs

soars”,BBC, Mar 07 Global spending on ADHD drugs jumped 9-fold. 1993-2003: use of ADHD medications 274%.

“Babies driving robots at University of Delaware”Robots that help to improve the mobility of infants with Down Syndrome, cerebral palsy, autism and other disorders

Health Food

(organic, gourmet, halal, kosher)

Special Needs Education• Singapore - 10,000 kids with special needs with 1700 more diagnosed each year.• Autism (6% kids), Dyslexia (4-10% pop), Intellectual Disabilities (2%), Down’s syndrome (1.2%). • $2000-$4000/mth for therapy on autistic kids; music therapy CDs costs $400-1000• KKH -3 mths for appt for diagnosis, 2-4 mths to see psychologist, 2-3 mths to see occupational therapist.

“You (Singapore) could lead the world in this (handling Dyslexia)”. F1 racing legend

c) Entertainment / Tourism / Events

Hotels,

Theme Parks / Cruises

Events / Activities“The kids’ market is very big – it is a multi-million-dollar business” VizPro, Entertainment Co., Singapore

5-day Animation Course:S$400

Soccer Camp: S$200

Aqua Botanist: S$75

A million U.S. youngsters aged 6-17, rely on personal trainers to shape up, improve in sports.

OvernightMuseum: S$60

Germany

U.S.

South Africa

“There's room for a children's hotel in every major city!”

U.K. Themepark U.S. Cruise

d) Technology-related (for “Millennials”)

Others Education (E-learning, E-books), Entertainment (Digital/Virtual Games), Kids-only Laptops

Security(ID Security, Child Tagging)

Communication“American teenagers have embraced handphones so wholeheartedly that .. have come to define their sense of self, reported CNET.com… half of kids aged 8 to 12 own handphones.”

Kids Talk™ is a talking ID wristband that records name, address,

telephone number, allergies, etc

In Silicon Valley, Wherify Wireless was selling a US$200 watch that picks up GPS signals, and a child's GPS-implanted backpack for US$900.

“latest parenting growth industry: a multimillion-dollar market in new and ..flashy "child-tracking" devices.”, The Guardian, London i-kids Mobile

PhoneAUD$274

Advent KChildren’s Notebook ₤

649

“MP3 music players are among the hottest gift items this year - for preschoolers,” ST Nov 30, 2007

Apple iPod Shuffle

e) Others (Blue-Sky)

Financial Services(Banking, Philanthropy Management, Trust Fund)

POSB – has 360,000 accounts < 12 yrsOCBC – Mighty Savers (gifts, no interest), < 15yrsUOB – Junior Saver’s account (includes life insurance)Citibank, Standard Chartered Bank, HSBC, Maybank

Research and Consulting(Research on Product, Market, Child Policy, etc; Franchise Consulting for Kids Business)

Varied High-value Consumer Products, Specialized ServicesClothes, Milk Bottles, Strollers, Toys, Child Care, Convenience Stores, Lifestyle Club, Yoga,Cinemas - “Stars & Strollers”, Babyplanners

Bisphenol-free, S$26.90

Designer Chair, ₤

295

Assisted Reproduction

Industry

Early Education Industry

Kids’

City

General(Blue Sky Potential)

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