Temasek in Thailand: Stumbling from one mishap to another

Thitinan Pongsudhirak
Bangkok Post
13 Nov 06

In view of their scandalous dealings with deposed prime minister Thaksin Shinawatra and his family, senior Singaporean officials are remarkably defiant. Instead of owning up to their complicity in hastening Mr Thaksin’s demise and contributing to Thailand’s long and costly political crisis, both Prime Minister Lee Hsien Loong and Minister Mentor Lee Kuan Yew remain adamant that Temasek Holdings, the Singapore government-owned holding company that purchased the Shinawatras’ 49.3% stake in Shin Corp last January to the tune of 73.3 billion baht, is a run-of-the-mill business enterprise that made a sound investment decision.

Never mind that Temasek’s decision to let Mr Thaksin and his family cash out of Shin Corp sparked protracted protests in Bangkok that culminated with the military coup and Mr Thaksin’s ouster on Sept 19. Never mind that the executive director and CEO of Temasek is Prime Minister Lee’s wife, Madam Ho Ching, who has more or less kept out of the limelight in favour of her husband and father-in-law.

As if to heap insult on top of injury, Prime Minister Lee stated in a speech to the Asian-European Editors Forum on Oct 6 that the Thai putsch was a setback for the country’s democratic system. Justifying his view on Mr Thaksin’s electoral prowess, Mr Lee completely missed the essence of the Thai crisis. It was Mr Thaksin’s erosion of legitimacy on a long trail of constitutional violations, corruption and abuse of power that led to his downfall. Elections without accountability and checks-and-balances under Mr Thaksin’s Thailand were necessary but not sufficient for acceptable democratic rule.

Minister Mentor Lee followed his son’s remark with the insistence that the Temasek-Shin Corp transaction was completely above board.

Both father and son did what Mr Thaksin would have done. They insisted on what is legal on paper but illegitimate and possibly illegal in practice. On the one hand, Temasek is ostensibly an independent company that bought Shin Corp, nominally owned by the Shinawatra children, not Mr Thaksin himself. On the other, Temasek is owned by the Singaporean government and directed by the prime minister’s spouse, and Shin Corp was ultimately owned and governed by Mr Thaksin, despite the absence of his signature on paper.

To finalise the deal, Temasek set up a front operation through Kularbkaew, a nominally majority Thai-owned company that bought Shin Corp with loans from Temasek, a circumvention of local foreign business law and its foreign shareholding limit of 49%. Such legalistic manoeuvres were Thaksinesque, manipulating the spirit of the law, rules and regulations. Temasek’s actions have caused ripples through the foreign investor community in Thailand, and have posed a conundrum for Thai policy makers, who have long been lenient with the enforcement of the Foreign Business Act. Official investigations on nominee shareholding have opened a can of worms that could prove detrimental both to foreign investment and to the Thai economy unless an acceptable compromise that imposes punitive measures on Shin Corp without adversely affecting foreign companies across the board can be found.

To be sure, Shin Corp comprises tainted assets based on state concessions Mr Thaksin carved out unscrupulously, ranging from a mobile phone service and a television station to a satellite operation. That Shin Corp’s paper wealth more than trebled during Mr Thaksin’s rule was critical in laying the basis for the anti-Thaksin demonstrations. His political power increased his commercial wealth with the benefit of blatant conflicts of interest.

The political fallout from Temasek’s Shin Corp investment decision has been profound. It led indirectly to the fall of a Thai government. For the Lee family to feign ignorance and maintain their self-righteous high ground is disingenuous. It does a disservice to Temasek’s intention to navigate a way out of the commercial quagmire. The company has belatedly established an office in Bangkok, presumably to undertake a public relations drive and mount a legal rearguard action to protect its interests. Without Mr Thaksin at the top, Shin Corp’s share price has gone into a tailspin. The prospects of Shin Corp companies are utterly murky.

More importantly, the Temasek affair has put Thai-Singaporean relations at risk. Despite his setback remark on Thai democracy and his insistence of Temasek’s innocence, PM Lee has seen fit to raise the issue with Prime Minister Surayud Chulanont in their personal meeting. Gen Surayud rightly assigned the Temasek-Shin Corp case to the Thai judicial process. Without assistance from the Surayud government, Thai law will have the final say.

Thai-Singaporean relations at the government level, of course, will continue unimpeded by the Shin Corp scandal. What is at stake for Singapore is the general sentiment among the Thai people towards the island state. If Singapore’s leaders want to repair the damage caused by Temasek’s misadventure, they should begin by owning up to how the Shin Corp deal impacted the Thai body politic. However reluctant, words of regret are needed to mend relations and restore Singapore’s reputation in local eyes.

Indeed, if the Temasek-Shin Corp deal was completely above board, as PM Lee maintains, Singapore officials would not have to repeatedly insist that it was completely above board.

The writer is director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University.

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