Singapore Inc peels a veil in the dark

Gary LaMoshi
Asia Times

After biting off a corner of its ban on chewing gum, Singapore now promises to prick the bubble of secrecy around Temasek Holdings, the government investment company in this alleged bastion of free-market capitalism (see Singapore’s capitalist myth , November 7, 2002). On Wednesday, Temasek announced that it will make future annual reports public, starting with the fiscal year ending March 31.

That’s another veil that Temasek – aka Singapore Inc, a wholly owned subsidiary of Singapore’s Ministry of Finance – is dropping during this 30th-anniversary year. Last month executive director and chief executive officer Ho Ching revealed that the company has produced annual returns of about 16 percent over its history. Over the past decade, Temasek has managed returns of slightly over 13 percent, or half of what General Electric managed for its investors.

Don’t expect Temasek’s upcoming annual report, due in July or August, to feature detail comparable to what Singapore’s government demands from its publicly listed companies. “Hopefully, we will have some kind of financial information about Temasek” in the annual report, company spokeswoman Eva Ho explained to the government’s Straits Times newspaper, “but in what form, and how much we can disclose, we don’t know at this point.”

‘Mirror, mirror on the wall …’

Instead, readers can look forward to the typical glossy annual report full of smiling workers and upbeat words from the top brass, without any numbers to back them up. But don’t worry, because Temasek “held up a mirror to ourselves”, according to CEO Ho, to find a strategy to ensure continued success.

In that mirror, Ho would see the wife of her boss, the finance minister and future prime minister (perhaps within weeks, according to some pundits) Lee Hsien Loong, whose father is the country’s patriarch Lee Kuan Yew. Ho’s brother-in-law Lee Hsien Yang runs Singapore Telecommunications, one of the jewels in Temasek’s crown. Some, less conscious of Singapore’s libel laws and government officials’ penchant for using them, might see that as a portrait of a royal family. In response, Ho and clan can point to a track record that’s made the tiny state rich.

Ho doesn’t give interviews, other than an occasional chat with Singapore’s government-owned media. In a speech in February at Singapore’s Institute of Policy Studies she revealed that Temasek hoped to accelerate its investments elsewhere in Asia, where it sees prospects for more robust growth. “We will work to transform our portfolio from a proxy for the Singapore GDP [gross domestic product] into a balanced GNP [gross national product] portfolio leveraging on the growth and promise of Singapore, ASEAN [the Association of Southeast Asian Nations], Asia and the world,” Ho declared. That work is progressing with dispatch.

Family jewels held

While Temasek may shave some of its holdings within Singapore, “We don’t intend to raid the larder or sell the family jewels,” Ho assured all. To finance future offshore acquisitions, Temasek could range beyond its own DBS Bank to the bond markets. While Temasek won’t open the books to the public, it might let Standard and Poor’s or Moody’s have a peek, in order to establish a bond rating for borrowing.

Temasek has shown a growing appetite for acquisitions. Just across the Johore Strait this week, it scooped up a 5 percent stake in Telekom Malaysia. Both Temasek and its SingTel nephew have rival stakes in Indonesia’s cellular-phone business. But Temasek’s principal overseas focus has fallen on banking.

Last year, it led consortia that bought control of two Indonesian lenders, Bank Danamon and Bank Indonesia Internasional (BII). With the opening of Indian private banks to foreign investment (see FDI keeps India’s banks on their toes , February 4), Temasek took a piece of the biggest available target, ICIC. This week, reports emerged of Temasek training its radar on Malaysia’s ninth-biggest bank, Alliance; South Korean market leader Kookmin, one of Temasek’s partners in the BII deal; and Thailand’s Bank of Asia.

Added complications

Why shareholders and host governments would allow Temasek to extend its tentacles in this fashion is a mystery. Foreign investment can be tricky, particularly when the local government is selling the stake and a multinational is buying. When that multinational is owned by another government, relationships can be far more complicated.

As ASEAN moves toward economic and, if Indonesia gets it way, security integration, there’s at least the possibility that Singapore could not only negotiate on behalf of its commercial interests (that’s pretty normal), but have the potential to cause disruptions of key services in countries that won’t go along. Citigroup may be a US company, but it doesn’t take its orders from its government: Temasek does. Furthermore, while Temasek pledges to obey local laws wherever it operates, it is hard to imagine it can shake the habits of censorship and surveillance in fields where privacy matters, such as banking and telecoms, or using its political clout to punish rivals. Whether Temasek can and will, why should any other government, or company stakeholders, believe it?

They should not until Temasek begins to take a more responsible attitude toward its own shareholders. Although Singapore’s media call the Ministry of Finance the “sole shareholder” in Temasek, that’s simply not so. Temasek’s shareholders are the 4 million citizens of Singapore.

For 30 years, Temasek has refused to share even the most basic information about the company with its owners. Now Singapore Inc has embarked on a bold new strategy based after it “held up a mirror to ourselves”, rather than consulting the public on some basic questions: Do Singapore’s citizens think it’s a proper function of their government to buy stakes in Korean banks and Indonesian cell phone systems? Or are there better things the government could be doing closer to home? Now that Singapore has risen from the swamps to one of the richest places on Earth – and an alleged bastion of free-market capitalism – isn’t it time to let go of some “family jewels”?

These are questions that deserve a vigorous debate. Pity is that few in Singapore seem to be asking those questions. Bigger pity is that if they did, Temasek and the government that runs it would be unlikely to join the debate and provide answers.

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