GIC won’t move to Temasek level disclosure: PM Lee

May 7, 2008
Singapore Democrats

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Reuters

Singapore’s Prime Minister Lee Hsien Loong said on Tuesday its biggest sovereign fund GIC will not be as open as sister fund Temasek in disclosing details about its portfolio despite pressure from Western lawmakers on government funds.

“GIC and Temasek are different,” said Mr Lee in an interview with Reuters.

“We do not want to tell people exactly how much we have, so people can take a run on the Singapore dollar.”

He also said inflation – currently running at a 26-year high – was mostly imported and he did not expect it to dent Singapore’s competitiveness.

Investments by sovereign wealth funds in major global banks, including by Singapore in Citigroup and UBS, have sparked concerns in the West that foreign governments might be investing for political rather than financial gain and one day may use the stakes to advance their national interests.

Singapore in March agreed to a set of voluntary principles with the US Treasury aimed at regulating sovereign wealth funds.

“Knowing exactly how many dollars I have and where exactly they are deployed doesn’t help you understand what I’m doing. It doesn’t explain my motivation, it doesn’t explain my governance. It doesn’t show you I am able to operate responsibly and commercially,” Mr Lee said.

Temasek, with more than S$160 billion under management, produces a yearly report that states its returns on investments plus its list of major stock holdings.

In contrast, GIC states that it manages well over $100 billion (S$136 billion) in assets but no other details. Some analysts estimate it could manage more than $300 billion.

“I’m even prepared to say in the long term how generally we have performed. But year-by-year, stock-by-stock, trade-by-trade … We are not confident we are able to operate that way,” he said.

“Temasek is a subset of our portfolio. What they declare is what they manage… The information is available from listed companies anyway.”

Sovereign wealth funds from Asia and the Middle East have become more influential in financial markets after pouring billions of dollars into several big banks that were reeling from losses related to the distressed US mortgage market.

The Government of Singapore Investment Corp (GIC), of which Lee is deputy chairman, has to-date invested $11 billion in Swiss bank UBS and $6.88 billion in Citigroup.

Temasek has bought $5 billion worth of Merrill Lynch shares.

Inflation

Mr Lee also said inflation – currently running at a 26-year high of 6.7 per cent – was mostly driven by the rising cost of imports and he did not expect it to dent Singapore’s competitiveness.

The island’s central bank tightened monetary policy in April by shifting its currency higher and government data showed first-quarter economic growth was far stronger than expected.

The currency is the central bank’s main policy tool, unlike several other central banks that use interest rates.

Mr Lee said the central bank policy move would “moderate imported inflation”.

He said the government had avoided the use of subsidies and price controls to try to combat inflation because they lead to problems, but it had adopted another strategy.

“We have gone for a strategy of direct assistance for low-income households financially, targeted and effective, so that we get maximum bang for the buck,” he said.

The government expects economic growth to slow this year as demand slows from its top export markets, the United States and Europe.

But Mr Lee said the government could boost growth through fiscal measures, such as by resuming shelved construction projects, if need be.

http://business.asiaone.com/Business/News/Story/A1Story20080506-63758.html