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Spore's GIC: Inching toward transparency - Nepotism In Spore Govt/ GLCs

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  • Mellanie Hewlitt
    Following the latest debacle concerning Severe Accounting Irregularities Found in GLC, and passing of the Constitution of the Republic of Singapore
    Message 1 of 1 , May 11, 2004
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      Following the latest debacle concerning Severe Accounting Irregularities' Found
      in GLC, and passing of the Constitution of the Republic of Singapore
      (Amendment) bill which allows the government or statutory boards to transfer
      the national reserves to statutory boards or government companies, we append an
      old article which has continued relevance today.

      Singapore's GIC secrets: Inching toward transparency


      August 13, 2001
      By Eric Ellis

      'If you've got as good a record as they claim, why not shout it from
      the rooftops?'

      STEP aside, Sage of Omaha. You've got big-time competition in
      Singapore. Not even the legendary Warren Buffett has made the calls
      claimed by Singapore's Government Investment Corp. Indeed, the state-
      owned fund seems to have anticipated every major event of the past 20
      years, including the 1987 stock market crash, the Gulf War oil shock
      of 1990, and the Asian financial crisis of 1997-98. The fund's
      managers even claim to have gotten in early on Cisco Systems' amazing

      That's quite a record. Problem is, unlike shareholders in Buffett's
      Berkshire Hathaway, Singaporeans can't verify the GIC's boasts. Its
      portfolio, said to be worth more than $100 billion, is a state
      secret. The fund doesn't have to file annual reports, justify profit-
      and-loss statements, or even report to Parliament. And its managing
      director of markets, Ng Kok Song, decries transparency as
      a "fashionable subject" that has little place in his offices. In top-
      down Singapore, when government officials say the fund has been a
      huge success, Singaporeans are expected to believe them.

      The GIC is so secretive that many Singaporeans are suspicious about
      its source of funds; some believe the money comes from a compulsory
      state savings plan. (The GIC denies this and says its funds come from
      government reserves and surpluses.) But as Asia's economies slither
      into another recession, criticism has gotten louder. "The GIC says it
      is no different from other fund managers like Fidelity," says
      Singaporean-born professor Linda Y.C. Lim of the University of
      Michigan's business school. "So if you've got as good a record as
      they claim, why not shout it from the rooftops?"

      Finally, the government seems to be listening. Sort of. With an
      election looming and "corporate governance" the business watchwords
      of the day, a kind of glasnost seems to be arriving at the GIC.
      Singapore Senior Minister Lee Kuan Yew, who chairs the GIC, recently
      revealed who sits on the fund's board: many of the same safe hands
      who run the other government-owned companies that make up as much as
      60 percent of Singapore's economy. And he approved publication of a
      book commemorating the fund's 20th anniversary that reveals some
      superb calls--and some eyebrow-raising duds. There's the $220 million
      the GIC blew when China's state-owned Guangdong International Trust &
      Investment Corp. went belly-up in 1998-99. And the $100 million it
      pumped into Astra, the struggling Indonesian carmaker, a move that
      seemed designed to prop up the presidency of Abdurrahman Wahid. (The
      GIC also had a stake in the controversial Myanmar Fund, which
      invested in Burma.)

      But you don't build up a $100 billion portfolio without some winners.
      In a rare interview, Ng, 53, who's been with the fund almost since
      its inception, told Fortune that being invested in the US stock
      market since 1981 has "generated excellent returns." The GIC rode
      Pfizer's wild Viagra trip and has done well with Microsoft, both big
      investors in Singapore. Perhaps most impressive, the fund staked $25
      million in data-services provider Equant in the early 1990s and
      cashed out for $368 million before last year's tech wreck. (That
      Cisco bet was less successful: The GIC sold its $8 million stake in
      the mid-'90s, only to see its value blossom to more than $1 billion
      last year.)

      Is the GIC's secrecy coming to an end? Lee continues to argue that
      full disclosure of its holdings could imperil Singapore's currency in
      these volatile times. But many economists argue that the fund's
      purportedly stellar record couldn't possibly harm the currency and
      say the government's stonewalling is getting harder to defend. Be
      that as it may, Ng did tell Fortune that GIC funds are more likely to
      be directed across Asia in the coming years, "bottom-fishing" for
      investments as economies bounce out of recession. Of course, he
      wouldn't identify specific countries. After all, at the GIC that
      would be equivalent to giving away state secrets.


      "Current or former PAP MPs have often been appointed as executives or
      directors of GLCs, while GLCs have also served as recruitment grounds
      for the PAP."

      "Senior government officials and military commanders have also
      secured posts in the GLCs after retirement."


      Singapore issues rules to prevent 'crony capitalism'
      By John Burton in Singapore
      Published: May 1 2004 5:00
      Financial Times

      Singapore has issued new rules that increase oversight on government
      lawmakers serving as company directors, in an effort to prevent the
      emergence of "crony capitalism" in the city-state which prides itself
      on its integrity.

      Goh Chok Tong, the prime minister, said members of parliament with
      the long-ruling People's Action party must submit annually a list of
      their directorships and the total fees and stock options they receive.

      PAP MPs have found company directorships a lucrative sideline, with
      some sitting on as many as 11 boards and receiving fees of up to
      S$70,000 ($41,000, €34,000, £23,000) from each company.

      There are suggestions that private companies have sought the MPs as
      board members to gain influence with the PAP, which has ruled
      Singapore since 1959 and holds all but two seats in parliament.

      Mr Goh warned that "some companies may do so, hoping that this will
      facilitate their business inter-actions with the government or lend
      respectability to their operations".

      But some analysts believe private companies have little choice in
      currying favour with government MPs to gain a foothold in an economy
      dominated by state-owned companies.

      The PAP's political dominance and the high salaries offered for
      government posts to discourage corruption has drawn Singapore's
      brightest to the public sector and ruling party, depriving private
      business of the best talent.

      Mr Goh said the new guidelines on MPs' involvement in business would
      help improve transparency and draw a clear line between political
      duties and private interests.

      "The MP should also consider the possible impact that the
      directorship may have on his political life," the guidelines stated.

      There are suggestions that the PAP should place limits on the number
      of directorships an MP can hold.

      A survey by the Singapore Straits Times newspaper found that a large
      number of PAP MPs had been approached for board directorships and
      demand was rising due to an increased number of initial public

      The guidelines said MPs should not solicit for directorships as they
      may appear to be using their political position for personal gain.
      But the guidelines appeared to fail to address the close involvement
      of government MPs and other officials in state-owned companies, or
      government-linked companies (GLCs) as they are known in Singapore.

      Current or former PAP MPs have often been appointed as executives or
      directors of GLCs, while GLCs have also served as recruitment grounds
      for the PAP.

      Senior government officials and military commanders have also secured
      posts in the GLCs after retirement.

      Mr Goh, for example, was managing director of Neptune Orient Lines,
      the state-owned shipping line, before he entered politics, while
      David Lim, a former government minister, was recently named as NOL
      chief executive.

      This has led critics to suggest that the government is reluctant to
      privatise GLCs because it could hurt the employment and ownership
      interests of people closely connected to it.


      From: "apsonlim" <apsonlim@y...>
      Date: Wed Aug 13, 2003 6:15 am
      Subject: Why it is difficult for govt to withdraw from business

      Please click on this link for a comprehensive data of who's who in

      Why it might be difficult for the government to withdraw from

      BY Tan Boon Seng

      February 10, 2002

      Singapore Window obtained this documentation. As far as we know, the
      information is correct.
      IF readers know of any inaccuracies please contact the webmaster.

      GOVERNMENT-LINKED companies (GLCs) appear to be playing a bigger
      role in the Singapore economy than ever before. With Singapore
      experiencing possibly its worst economic downturn since
      independence, the government is re-examining its economic policies.
      The government's deepening and broadening involvement in private
      enterprise is among the policies being scrutinized by the
      government's Economic Review Committee. Some officials hint at a
      reversal of this practice but others appear to disagree.

      A closer look at the issue suggests that reversing this policy is
      difficult. The government's withdrawal from business could hurt the
      employment, income and ownership interests of people closely
      connected to it –

      1)relatives of senior government leaders,

      2)former senior government officials,

      3)former senior military commanders,

      4)current senior government officials, and

      5)current and former ruling party politicians. The outcome may also
      hurt the government's efforts to co-opt its politicians from the
      private sector.

      The Policy Debate

      ]Minister of State for Trade and Industry Raymond Lim in November
      said that the government might in future do less of "leading from
      the front". He also suggested the possibility of introducing
      competition law to address the dominance of GLCs. Mr Tharman
      Shanmugaratnam, Senior Minister of State for Trade and Industry, in
      December said that: "What really matters for East Asia is a shift
      towards open, competitive markets, and away from the state-driven
      industrial policies and the collusive domestic networks that have
      led to low returns on investment."

      However, Deputy Prime Minister Brigadier-General Lee Hsien Loong,
      who is heading the Economic Review Committee, has clarified the
      extent to which the government will withdraw from business. He said
      GLCs would continue to be "one of the thrusts forward" for the
      Singapore economy. His wife, Mdm Ho Ching, who is Director of
      Temasek Holdings and Deputy Chairman of Singapore Technologies, has
      shared her dream for Singapore Technologies to become a "global
      champion", "to make the seemingly impossible, a reality". Mr S
      Dhanabalan, Chairman of Temasek Holdings, has also made it clear
      that the government will not withdraw from businesses it deems it to
      have a "strategic" interest in. Mr Dhanabalan said the government
      also intends to be involved in businesses of a high-risk nature.
      These remarks were made even before the committee's work had begun.


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