Singapore sovereign wealth fund promises greater transparency
Peter Thal Larsen & Martin Dickson
28 Jan 08
Singapore’s Government Investment Corporation has promised greater disclosure about its activities, amid mounting concerns about the secretive fund’s influence after high-profile investments in UBS and Citigroup.
Tony Tan, deputy chairman of GIC and a former Singapore deputy prime minister, said the fund planned to become more transparent as part of a broader effort by sovereign wealth funds to agree a set of common standards.
“We have already decided that the circumstances have changed. The right thing to do is to move to a path of more disclosure,” Mr Tan said in a rare interview. “The greatest danger if this is not addressed directly is that then some form of financial protectionism will arise and barriers will be raised to hinder the flow of funds.”
However, Mr Tan would not be drawn on what areas of disclosure GIC would improve, arguing that this was a decision for the Singaporean government.
GIC, which says it manages more than $100bn but is estimated by analysts to oversee three times that amount, has come under intense scrutiny after injecting $16bn in UBS and Citigroup. The investments, a departure from GIC’s low-key approach, have prompted politicians to question the fund’s influence, while some UBS shareholders have complained the investment dilutes existing investors.
Mr Tan insisted GIC was interested only in a financial return, and revealed the fund had recently rejected an offer from UBS to nominate a board director. “I think we want to be seen to be quite clear that we are not seeking control,” he said. Along with funds from Abu Dhabi and Norway, GIC is helping co-ordinate an effort by the International Monetary Fund to agree common standards for sovereign wealth funds.
Mr Tan said concerns in Europe and the United States were “understandable” and should be addressed. However, he said guidelines should be flexible, voluntary, and recognise that not all funds were the same.
GIC’s investments in UBS and Citigroup have prompted some observers to suggest it is becoming more aggressive. But Mr Tan said the fund had been able to invest such sums because it cashed in a significant chunk of its equity investments in 2007, before the market turmoil struck. He said the investments in UBS and Citigroup were unusual and did not reflect GIC’s “preferred mode of investment”.
Singapore PM “transparency isn’t everything”
27 Jan 08
The PM of Singapore is a staunch defender of its wealth funds – but does not want a free press. He talked to Mark Kleinman in Davos
Is Lee Hsien Loong the most powerful man on Wall Street? The prime minister of Singapore might dismiss the idea, but the recent humbling of the world’s most powerful financial institutions suggests it may not be as absurd as it sounds.
Injections of $9.31bn, $6.88bn and $5bn into UBS, Citigroup and Merrill respectively have helped cement Singapore’s place on the global financial map and triggered a new wave of recriminations over the power and transparency of government-backed investment funds. Yet even as economists hail the migration of financial clout from West to East, the most powerful man in Singapore is more circumspect.
“I don’t feel anything like that [kind of power],” Lee told The Sunday Telegraph at the World Economic Forum at Davos. “We don’t take control of the companies we invest in, we don’t want control and we are not looking for seats on boards. It is not our business to tell foreign banks how to run their companies.”
The injections of capital into Wall Street banks by sovereign investors from the Middle East and Asia have nevertheless been the financial phenomenon of the past six months.
So far, more than $60bn has been ploughed in to investment banks’ balance sheets in an effort to draw a line under their exposure to the imploding sub-prime mortgage industry.
To that extent, some economists argue, the governments of Abu Dhabi, China and Singapore have done more to secure the stability of the global financial system than the central banks of Europe and the US.
Lee is, however, no apologist for the fast-growing breed of often secretive funds that analysts at Morgan Stanley have predicted will account for $27?trillion in assets by 2022.
“There has been a proliferation of things which like to call themselves sovereign wealth funds, but they are very different animals. Often they are not even of the same sub-species,” said Lee. “Our funds are accountable to the government. I would not believe that transparency is everything.”
Singapore’s twin investment funds – Temasek Holdings and Government Investment Corporation – manage about $400bn between them, a large chunk of which has been deployed in Britain. Between them, their UK portfolio includes an 18 per cent stake in Standard Chartered, 2.1 per cent of Barclays and 3 per cent of British Land.
Where foreign takeovers have attracted close scrutiny and sometimes outright opposition in the US – the abortive takeover of Unocal by the Chinese state-owned oil company Cnooc, for example – the same has not been true in the UK.
“Britain has proved to be a very open place to invest, and there is no reason that should not continue. Examples like Unocal and Dubai Ports World [which was prevented from buying the US operations of P&O] sour the mood and set a bad example.
Even when US unemployment is below 5 per cent, there is always an undertone of protectionism, whether it is from the steel industry or sugar-cane growers,” said Lee, who sits at the centre of one of Asia’s most powerful families.
His father, Lee Kuan Yew, is the city-state’s Minister Mentor or elder statesman, and his wife, Ho Ching, is the chief executive of Temasek.
The family will have had much to discuss. Singapore has experienced its own difficulties with overseas investments. Its takeover of Shin Corporation, a Thai telecoms company, sparked outrage from its south-east Asian neighbour and was one of the triggers of the coup that overturned the former Thai prime minister, Thaksin Shinawatra.
The Singaporean government owns majority stakes in many of the country’s commercial crown jewels, including Singapore Airlines and SingTel, but Lee insisted that reciprocal investment was welcome. “From an economic policy point of view, I would not look at an investor and say: ‘Is this a sovereign wealth fund?’ I would be concerned if there were national security or defence issues, but otherwise we are open. If an investor wanted to come in with sugar daddy money and pay a lot of money like Japan did in the US in the 1980s, I would be happy.”
Despite the marital connection, Lee was keen to emphasise that he did not spend all his time contemplating the deployment of Singaporean capital.
Two years on from the Shin Corp takeover, Lee is attempting to forge closer ties with his fellow governments in the region. An Association of South-East Asian Neighbours (Asean) plenary in Davos was designed to “institutionalise closer integration” between Singapore and neighbours such as Indonesia and Thailand.
“As the prosperity of China and India grows, we are anxious that we do not get lost among the Asian superpowers,” he said.
Lee’s vision for the Singaporean economy is based on the core pillar of a booming financial services industry, which he said was well-placed to compete with Hong Kong, its regional rival, despite the latter’s proximity and ties to mainland China. “Hong Kong is preoccupied with China, while we are more omni-directional in our approach.”
Singapore has proved an attractive environment for alternative asset managers such as hedge funds and private equity firms to base themselves there, and Lee is attempting to extend that magnetism to industries such as medical tourism.
“We attract many people from the Middle East. In the West, their money is welcome but they can feel like they are being looked at askance.”
One thing Lee’s government does not welcome is a critical fourth estate. Singapore’s media laws prevent criticism of the government, and Lee makes no apology for that.
“The press is free to report views that are different to the government but it is not their job to hold the government to account. Your job [as foreign media] is to report facts, not to get involved in Singaporean politics.”
He is less definitive about the global economic outlook.
“We do not yet know how tough a time the Americans will have. I am not sure about it being Asia’s century. The region is doing reasonably well now. I hope that will continue.”
More than ever, in these uncertain times, the rest of the world may share his view.