Post Office, turned to a luxury hotel
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If you thought that I was going to talk about the Nuwara Eliya Post Office and the aborted plan to convert it to a tourist hotel, I am sorry, you are wrong. My purpose today is to talk about an actual project that transformed an iconic Post Office building to a five-star luxury hotel – The Fullerton Hotel in Singapore.Then you may have a question to ask: So, why is this issue important to discuss in this column? This is because our last week’s discussion in this column was on “institutions” which are defined in Institutional Economics as the “rules of the game” in a society.
It is not only the “policies” but also the “institutions” that matter in economic transformation in achieving prosperity. Our story today is a case study to understand how “institutions” support transformation in some countries, and not in other countries.
Rules of the game
Institutions, as perceived in economics, are the rules of the game that everyone sticks to in playing their role in the society. Their impact and influence in economic prosperity can be either positive or negative. Accordingly, some nations transformed themselves and became rich, while others continued to remain poor.
Policies alone do not work without the right kind of institutions or the established rules of the game in a society – laws, regulations, norms, values, beliefs and attitudes. They shape the behaviour of individuals and their organisations. Accordingly, institutions determine the behaviour patterns of people as individuals as well as the members of the organisations they belong to.
Politicians, bureaucrats, businesspersons, trade unionists, student unionists, civil society groups, opinion makers – everyone plays according to the “rules of the game” irrespective of whether the game is to support or oppose the transformation of a society to a prosperous one.
Institutions are two-types: formal and informal. Formal institutions include laws, regulations and government organisations. Informal institutions have evolved in the society shaping values, attitudes ideologies and beliefs as well as informal organisations representing them.
Story of Fullerton
The Fullerton Building in Singapore, located in the Fullerton Square is known to be a grand neoclassical landmark, built by the British during 1924-1928. The historic significance of the Fullerton Square was, in fact, much older than the Fullerton building.
The Fort Fullerton was built about 100 years before the Fullerton building and was named after Robert Fullerton, the first governor of the Straits Settlements. The Fullerton Square has the remnants of the “Singapore Stone”, which is an ancient stone monument with inscriptions that predate the arrival of the British.
In the two weeks after the opening of the Fullerton building in 1928, the General Post Office (GPO) was housed there. It continued to be the anchor tenant of the Fullerton building until 1996, giving generations of Singaporeans the opportunity to visit the building to post letters and parcels and meet other requirements of a postal department.
Mailing room
As reported by the Singapore Straits Times on December 7, 2015, there was a 35-metre-long subway that connected the sub-ground floor in the Fullerton building with the Post Office Pier to facilitate mail delivery by sea. In those days airmail deliveries were not common. Letters dropped into the post box would fall into the sub-ground floor onto a conveyor belt which delivered it 60-metre along the basement to the sorting room.
As the GPO was housed at the Fullerton building, it also came to be known as the GPO building. In addition to the GPO, later the building had also accommodated the Exchange, Chamber of Commerce, and the prestigious Singapore Club.
The Fullerton Building was officially declared a hotel and opened as The Fullerton Hotel Singapore on June 27, 2000. Today, it is a five-star luxury hotel with 400 rooms and stunning views of the Singapore River and Marina Bay. Various categories of hotel rooms cost in the range of US$400-600 per night, while hotel suites cost even up to $2,500 per night. The hotel is owned by the Hong Kong-based Sino Group, which also manages its other properties in Hong Kong and Australia.
National Monument
Despite being a hotel, the Fullerton Building was also declared a “National Monument” of Singapore in a Gazette notification in December 2015. It is, indeed, a question as to why the Singapore government decided to convert such an iconic historical building with a national heritage value to a luxury hotel for tourists.
My brief research reveals that, more importantly, preserving it as a hotel managed by the private sector would be “one of the best ways” to honour its heritage and architectural beauty and historical value. The Singapore government announced its plan to convert the building into a hotel in 1996, recognising its potential to become a premier destination for visitors.
Consistent with this innovative idea, the building had an exclusive locational advantage for the thriving tourism industry in the country. The initiative was also part of a broader urban re-development plan rather than just converting the building to a hotel.
As a privately managed luxury hotel, with renovation during 1997-2000 costing about $400 million to the owners of the hotel – Sino Group, its historical value had been protected and enhanced. If the Singapore government had not done what it did converting the building to a luxury hotel as such about 25 years ago, it would have still remained an old Post Office building.
Thriving tourism
Singapore has a thriving tourism sector. The country reported 14 million visitors and $20 billion tourism earnings in 2023. In the same year, the average hotel occupancy rate in Singapore was as high as 80 per cent.
Despite a significant increase in tourist arrivals last year, it is still below the pre-pandemic hotel occupancy rate of 87 per cent in 2019. About two-thirds of the visitors are holiday makers, but there is significant contribution to the total number of tourist arrivals by those who arrive in Singapore for business purposes. The increase in visitor arrivals in 2023 was driven by strong demand from a mix of Singapore’s key markets, led by Indonesia, China, Malaysia, Australia, South Korea, and the US.
With its $85,000 per capita GDP, Singapore is Asia’s richest economy. Its exports of goods and services, amount to $875 billion in 2023, which is as high as 174 per cent of GDP. Throughout its historical development process, foreign direct investment (FDI) inflows continued to make a major contribution to Singapore’s development. With $160 billon FDI inflows in 2023, Singapore has now reached even China’s annual FDI level.
Hostile institutions
Our case study from Singapore reveals the importance of a few key factors underlying the achievement of prosperity of a nation. It is, of course, a “project” but the aggregation of projects constitutes part of the macro-level transformation.
The first key point is the “visionary leadership” to identify or to understand the importance of long-term transformation for the prosperity of a nation. The second is the “right policies” that creates conducive policy environment for transformation. The third, which is the core of our case study today, is the “supportive institutions” that enable the transformation.
It is easier for some countries, which are of course not many, to execute transformation as the players – individuals and the organisations that they represent – act in consistent with innovative ideas for transformations. Many other countries, even if they have visions, continue to fail in executing the transformation as per the visions, because they have either wrong policies or hostile institutions or both.
Laws and regulations can be amended, and formal organisations can be reformed, if the existing ones contradict the proposed changes and expected transformation. There could be opposition for such changes too. The changes are more difficult and complex in the areas of established ideologies, norms, values, attitudes and beliefs. It is even more difficult when there are organisations and lobbying groups representing such elements and vested interests to work in a hostile manner.
(The writer is Emeritus Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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