By Robin Chan

NO ONE likes being told they could look a bit more attractive. But when the advice comes from someone helping to run a company that makes facial care and grooming products used by billions of people, it pays to take note.

In this case, the one needing a bit of work is Singapore itself, long the darling of foreign investors bearing bags of money, but now facing challenges on several fronts, says Mr Robert McDonald, chief operating officer of the consumer products giant Procter & Gamble.

And it's not just that there is a wealth of younger, fresher nations out there keen to show a bit of leg to deep-pocketed multinational corporations.

Mr McDonald, who was in town recently to advise the Economic Development Board (EDB), believes Singapore has issues closer to home that need to be tackled - from living costs to educational shortfalls and the ongoing uncertainty that surrounds it over its status as a 'tax haven'.

This last point has suddenly loomed large among foreign investors, he says of the issue that was raised at the G-20 summit. Multinationals may hold back their dollars until there is more clarity, he adds.

The Singapore Government has already indicated that the country will adopt global standards for tax information exchange and it has been placed on a 'grey list' of countries that are not considered tax havens but have yet to substantially implement the measures required.

Last month, US President Barack Obama ratcheted up the issue by announcing a move to cut the overseas tax benefits of US multinationals in places like Singapore and Hong Kong. Singapore moved to lower its maximum corporate tax rate earlier this year to 17 per cent from 18 per cent.

But while that remains in the lap of the political gods, Mr McDonald, an American with a decade of working in Asia behind him, cites plenty of real-world issues Singapore - and P&G - must deal with.

Touted by many as the heir apparent to chief executive A.G. Lafley at the world's largest consumer products maker, Mr McDonald, who is now into his 29th year with the company, oversees the operations and investment strategies of an industrial powerhouse producing items from Pantene shampoo to Gillette razors for 3.5 billion people - more than half of the world.

He makes it clear that financial considerations still hold the most sway when MNCs like his decide whether they will keep investing here.

'Singapore has got to have a competitive reason,' he says, adding that the country is becoming increasingly expensive, with higher labour costs and rising costs of living, while talent is also limited.

And the stakes for Singapore could not be higher. After all, the country's growth story is marked by its single-minded pursuit of foreign investment. Singapore is already home to more than 7,000 foreign companies and its reliance on them is growing.

Foreign companies accounted for $15 billion, or 85 per cent of the total fixed asset investment commitments in 2007. Ten years before that, it was about 62 per cent. Over the same period, the share of gross domestic product (GDP) of foreigners and foreign companies has risen from 34 per cent to 44.5 per cent.

The good news for now is that Singapore's central location amid the heart of an emerging Asia ensures it remains economically relevant to multinationals.

'We have the largest plant expansion programme going on in our history...the majority are in emerging markets, places like South-east Asia, because that's where capacity needs to go,' says Mr McDonald, who is trying to double worldwide sales to US$175 billion (S$252 billion) over the next 15 years. P&G plans to build 19 factories around the world over the next three to five years, with only one set for the United States.

But he points out that from Dubai to Panama, there are more countries that are increasingly attractive to foreign investments.

This being the case, Singapore must redouble its efforts to stand out among a crowd of attractive 'host' investment destinations and become a 'home' for business and talent.

The host-to-home concept, which was coined by the EDB, appeals strongly to Mr McDonald.

'The host idea is I give you a tax subsidy for three years to get you to build a plant. When the subsidy goes away, the plant is no longer profitable, then you pull out. That's not what we want. That's not what Singapore wants,' he says.

'The home idea is a long-term strategic partnership. And I think if we do the host-to-home right, we won't see multinationals pulling out. The home idea is a new idea, it's a whole new branding.'

This vision was mapped out and endorsed by 12 corporate bigwigs from the US, Europe and Asia at a meeting of the EDB's International Advisory Council in April.

Mr McDonald, who attended the meeting, remains decidedly bullish on Singapore: 'It has the opportunity to attract business and then become a nexus for innovation because of all the people we have here, education, companies and the Government.'

But the challenges cannot be ignored.

Last year, for example, telecoms giant Motorola closed its handset plant here, firing 700 workers in the process. This is part of a bigger trend that has seen electronics producers moving factories to lower cost areas like Vietnam and China.

'Singapore is a very expensive place. The kinds of things we would put here are those with lots of technology involved, where you need a highly educated workforce, a disciplined workforce. Or one where you need the geography because you are so close to the market,' he says.

Mr McDonald discloses that P&G is in discussions to put a water purification research and development centre here for its Pur brand. It also opened a plant here in 2007 to make scents for products like shampoo. He is optimistic that P&G will have another factory in Singapore within the next few years, although he adds the caveat that 'we would love to put 25 factories here, if it makes financial sense'.

For all the positive sentiment he has for this country, the reality is that cost matters. Even the issue of talent is a monetary one.

'If you're going to build an R&D centre, and there are insufficient PhDs, then we have to import them and importing is expensive...Singapore needs more engineers, more scientists.'

He adds that while Singapore is already 'doing a great job' in settling in expatriates, with increasing demand for places at international schools, the schools need continued support and expansion. Meanwhile, Singapore also needs to keep its cost of living competitive.

He is acutely aware of Asia's economic importance and admits that P&G was a bit of a latecomer to the region. 'The Asian consumer is critically important to our business in the long term,' he says.

Three years ago, emerging markets made up just 20 per cent of the company's business, and while it is now closer to 30 per cent, the figure is still lower than that of its competitors.

'We have a lot of runway. We arrived late to most of these markets, so we are very eager to invest and to continue to grow these markets. For us, the consumer is boss...That means staying close to them to understand how to better meet those needs.'

He also stresses how vital it is for P&G to base people and research in the region, and cites this simple illustration: 'Asian hair is twice the radius of Caucasian hair, meaning six times the surface area.

'So when we launch Pantene here, we put extra conditioning in the shampoo. Most conditioning technology is made here in Asia, and we expand it around the world. This is the acid test for hair conditioning.'

No one strives to understand the consumer quite like P&G, which lives or dies by its ability to sell fast-moving products, from Pringles to Pampers, to a fickle market.

'Because of the financial crisis, consumers are more concerned about value than ever before. So we're finding new ways of communicating the value of our products,' he says.

But being a giant company does not necessarily mean value for the consumer.

'You have to remember that there is no reward for size. No consumer is going to stand in front of a shelf and say I will buy the product because it is the largest company,' he says.

P&G has gobbled up top brands like Gillette, Pantene and Wella in the past.

'There's no shareholder that buys P&G stock because it is the largest company...They buy our stock for growth, not size. And the bigger the size, the more difficult it is to grow.'

He says the company has to add a business the size of a whole Latin American region just to meet its growth targets.

While the company gets bigger, it needs to get smaller on the inside. 'What we are trying to do is to grow and restructure our company simultaneously so we don't go into these one-time episodic restructurings.

'We're going to grow but we have to simplify at the same time because through simplification we make a US$83 billion company look like a US$10 billion company and it's that US$10 billion that will have the agility to win in the future. Agility is critical.'

Despite a wealth of success and experience behind him, he still speaks of improving himself every day, learning and absorbing new ideas from new places. And that spirit also embodies his company, which has survived for over 170 years.

'No one accurately predicted the extent and speed at which this recession closed around global economies. The key now is to find how we can create opportunity from crisis,' he says.

The aim is for P&G's products to be used by four billion people by the end of the decade. But he adds: 'My goal, and I am going to be with the company for a number of years, is to get to all 6.7 billion people in the world. And I am not going to rest till we get there.'

This article was first published in The Straits Times.