Shady Temasek-Shin deal made in Singapore

October 9, 2006
Singapore Democrats

This post is at least a year old. Some of the links in this post may no longer work correctly.

The Nation
9 Oct 06

The statement was conspicuous, and its timing even more so. Singapore Prime Minister Lee Hsien Loong on Friday described Thailand’s military coup as “a setback” for the Kingdom and its democracy. This was a rare bold remark from an Asean leader on a country in the region. It came one day after Singapore’s investment arm, Temasek Holdings, sank deeper into the Thai political quagmire following the Supreme Administrative Court’s decision to accept a case against its controversial takeover of Thaksin Shinawatra’s Shin Corporation. The court’s move and Lee’s strong comment have come at a time when bilateral relations are facing perhaps the most difficult time in modern history.

Anti-Thaksin Thais resent Singapore. In fact, the island state’s name featured very negatively in a theme song of the street protests led by the People’s Alliance for Democracy. Embassy protests took place and a few petitions were written. Now that Thaksin has been ousted, efforts to take the takeover deal down seem to be steamrolling ahead with little local resistance.

Share prices of Shin Corp Plc, Advanced Info Service Plc (AIS), Shin Satellite Plc (ShinSat) and iTV Plc tumbled on Friday on fears the Administrative Court could revoke their business licences. Temasek has already suffered big financial losses from the deal because of the political crisis. Then on Thursday the Supreme Administrative Court ordered a lower court to consider a case filed by Rangsit University law lecturer Sastra Toa-on against the deal. The Singaporean investment giant’s real trouble could have just begun. Sastra alleged that the Information and Communications Technology Ministry, TOT Plc, the Prime Minister’s Office and the Transport Ministry had been neglectful by not revoking Shin concessions after the company was sold to Temasek Holdings in January.

The anti-Thaksin movement surely believes the Singaporeans deserve it. Lee’s country was the place where Thaksin’s shady business dealings took place, not to mention strong suspicion that the Temasek-Shin Corp deal was crafted to violate the limit of foreign ownership in key Thai industries. The Singaporean side, on the other hand, can be excused for feeling that it was hard done by. In other words, while Thais are blaming Singapore for being part of the problem, the latter must be thinking, “You dragged us into this situation.”

Singapore should have known better. Trusting during the takeover plan cost them dearly. Due diligence was reportedly not given much importance, if it was conducted at all. The serious matter of foreign ownership apparently did not cause much concern, or the signs of the alleged use of Thai nominees wouldn’t have been this clear. And then there was the life-and-death matter of state concessions, to which the Singapore side did not appear to give proper consideration. Political jokes doing the rounds after Thailand’s political crisis slashed Shin Corp’s share prices day after day suggested that Temasek had been duped fair and square by its partner Thaksin.

For all of Singapore’s attempts to defend the investment (Lee says it reflected neighbourly goodwill), deals like the one between Shin Corp and Temasek require greater prudence and transparency. Singapore fell into the “Thaksin trap” by allowing the deal to be done the “Thaksin way”, ie, fraught with murkiness, the exploitation of legal loopholes and a disregard for the possibility that key national laws might be breached. Despite all the ultra-sensitive aspects at play – national security, the independence of the broadcast media, satellite rights, state concessions and so on – the Thai people were kept in the dark. It was no wonder that when the deal was announced, despite Shin Corp’s repeated denials, the small anti-Thaksin campaign erupted into something unstoppable.

The deal brought Thailand to this tough point – a “setback” if you will. One thing Lee should acknowledge is that this “setback” was the result of Thai people clamouring for clean, transparent and accountable politics. The deal has also brought Thai-Singapore relations to this very delicate crossroads. Perhaps some soul-searching is needed. The intertwining of business, political and diplomatic interests is understandable. But investment is not the only way to show goodwill.

Understanding business risks is no exact science. Truly understanding your neighbour is much more complicated. We have found it difficult to understand Singapore’s “democracy”, but we have tried. Perhaps it’s time Singapore returned the favour, starting with Lee.