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Singapore Urged to Enhance Transparency

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    http://www.forbes.com/business/manufacturing/feeds/ap/2005/04/28/ap1982212.html Associated Press Singapore Urged to Enhance Transparency 04.28.2005, 04:18 AM
    Message 1 of 1 , Apr 29, 2005

      Associated Press
      Singapore Urged to Enhance Transparency
      04.28.2005, 04:18 AM

      The International Monetary Fund acknowledged Singapore's efforts to increase transparency, but urged it to do more in an annual review of the city-state issued Thursday.

      In the report, the IMF suggested that more information on key state-owned companies would be useful. It cited the Government of Singapore Investment Corp., the state-owned agency, as a group that continues to keep accounts confidential.

      Temasek Holdings, the other state-owned investment company, made its financial accounts public last year for the first time, a move the IMF characterized as a "milestone in enhancing fiscal transparency."

      "Following Temasek's example, the staff suggested that the government could also consider publishing, without disclosing sensitive details, the aggregate assets of the Government of Singapore Investment Corporation, the broad elements of its portfolio and its overall returns," the IMF said in the report.

      The government says there's enough internal oversight to ensure proper functioning. Singapore has a reputation for clean government.

      Temasek's investment portfolio includes top companies, such as Singapore Airlines Ltd. and lender DBS Group Holdings Ltd.

      The fund also said Singapore could release consolidated public sector accounts and more detailed information about the government's inflation target and its exchange rate policy.

      The Monetary Authority of Singapore publishes a monetary policy statement twice a year but doesn't disclose inflation or exchange rate targets.


      The Incestous World Of Singapore's State Runned Enterprises
      Mellanie Hewlitt
      23 Jan 2005
      Singapore Review

      I was very amused by Mr Chen Hwai Liang's weak and shallow rebuttal of Gary
      Rodan's December article "The Coming Challenge to Singapore Inc." Mr Chen had
      stated that:

      a) "GLCs are run commercially. Their managements are answerable to their boards,
      which in turn answer to shareholders" and

      b) "Most major GLCs are publicly listed"

      These flippant statements by a senior representative of government (from the
      Prime Minister's Office) on what are already publicly known "secrets" will only
      cast more shadows and doubts over the credibility of public administration in
      Singapore. It is a known fact that GLCs (Government Linked Companies), whether
      in the form of TLCs (Temasek Linked Companies), GICs (Government Investment
      Corporation) or SOEs (State Owned Entities) enjoy many special privileges which
      ordinary bonafide private sector companies do not.

      Regardless of how they are coined by the government, "GLCs" are viewed
      suspiciously by the general investing public and members of the international
      community. On the surface, these entities look and sound like bonafide business
      concerns. Many are listed on the Singapore Stock Exchange.But this is a skin
      deep appearnce which ends when one peers into the internal management of these
      companies. Under closer scrutiny, little has changed as regards management of
      Singapore's GLCs/TLCs/GICs (or whatever fancy new terms the authorities wish to
      coin) and the old issues concerning TRANSPARENCY, ACCOUNTABILITY, NEPOTISM and
      PERFORMANCE still remain.

      Deep pockets into public funds, operating in heavily regulated and protected
      markets and managed by retired Brigadiers, senior civil servants, ex-Ministers
      and other members of Singapore's Ruling Elite, these lumbering government
      vehicles are also known as scholar havens and double as "retirement homes" for
      Singapore's Ministers and senior civil servants. All this at tax payers expense.
      The attached "Nepotism" file will also show the close relations between senior
      civil servants and senior management of these GLCs.

      In fact, Singapore's State Owned Entities & GLCs are so privilleged that they
      have the unique honour of having the country's Contitution re-written to allow
      the state and State Owned Enterprises direct access to state/public reserves.
      All this has happened with the blessing of the Auditors General office and
      Finance Ministry.
      See actual Amendment to the Constitution below:

      Double Standards in Policy administration also favour these state related
      entites. For example, a competition law that Singapore plans to introduce in
      2006 has been criticised for exempting some government businesses that dominate
      local services in the city-state of 4m people. The legislation, which covers
      foreign-owned and domestic companies, provoked an unusually fierce debate in
      parliament despite the overwhelming dominance by the long-ruling People's
      Action party.

      Some key industrial sectors, such as telecom-munications, media, postal
      services, transport, power generation, water and waste management, would be
      exempt from the competition law. These sectors involve businesses, some of which
      are monopolies, that are managed by the government directly or are controlled by
      Temasek Holdings, the state investment agency. Further details are available at:


      But inspite of the many privilleges and exemptions lavished on them, these state
      owned companies continue to be dogged by performance issues. After many well
      documented failures and scandals, it is small wonder why GLC/TLC/GIC and other
      state owned entities in Singapore are regarded with a degree of suspicion and
      wariness by bankers and professionals within the financial industry. Many within
      Singapore's well heeled financial circles affectionately referr to GLCs
      (Government Linked Companies) as Giant Loss Making Entities or Giant Lee

      Ever wonder what happens to your CPF moneys and Tax Dollars? Look no further.In
      a paper published in 2000, Morgan Stanley's Singapore office estimated the size
      of Singapore's external economy at S$395 billion against the governments figure
      of S$339 billion at the end of 1999 or 2.4 times GDP. That was 3years ago and
      today in year 2003, this figure is probably much larger.

      The investment is held in the form of direct equity, portfolio investment
      andother foreign assets. Morgan Stanley's Daniel Lian says the Singapore
      government owns more than 50 per cent of the external economy through
      GLCs(government-linked corporations) which control about 60 per cent of offshore

      As Morgan Stanley's research paper says: "The external economy needs to secure a
      minimum eight per cent nominal return to avoid dragging down the overall economy
      from achieving its long-term growth potential of 6.5 per cent. The task of
      raising returns lies in the hands of the government and the GLCs."

      Offshore return has been declining as GLCs step up their investment. One
      probable cause, says Morgan Stanley, is poor investment judgment. Singapore
      wants to move into new high-tech industries, including biotechnology areas
      requiring high human and intellectual capital. But in an economy essentially
      driven by government policies, Singapore lacks a crucial ingredient -

      It is also noteworthy that frank and open coverage of GLCs/TLCs/GIC usually
      originate from the international press. Locally, within Singapore's heavily
      regulated media industry (until recently) there is scant mention of these
      government owned corporate entities which usually operate behind a veilof

      "A variety of analytical shields obscures the embarrassing size of
      government surpluses. Accounting principles differ from global
      standards. A bewildering array of statutory boards, government-linked
      companies, investment corporations and holding companies transact
      among themselves at undisclosed prices. Key data such as the
      government's share of national savings and the profits of holding
      companies and investment corporations are kept secret. One analyst
      calls the national accounts a "masterpiece of obfuscation."
      6 May 2004 Far Eastern Economic Review "Fiscal Predator"

      And where there is occasional mention of these elusive and painfully shy
      corporate creatures by the local media, Singapore Press Holdings (which has a
      virtual monopoly on Singapore's print media scene), these are usually adoring
      letters of admiration. This is hardly surprising given that SPH is itself a TLC.

      But the harsh economic reality today is that far from adding value to
      Singapore's bruised and battered economy, GLCs, TLCs and GICs are a real drag on
      the economy. The time is long overdue to retire these loss making relics and
      allow private sector economics to take its natural and inevitable course.

      Looking at the bigger picture, one often wonders what the dickens is happening
      to Singapore's GLCs and State Owned Entities? Many have been listed in a bid to
      create the illusion of an entity that is free of government influence. But
      despite the listing/privitisation aspirations, it is evident that red-tape and
      bureucracy permeate the rank and file management of GLCs.

      If the intent was to instill private sector initiative and efficiency in GLCs
      and SOEs, then looking at past experience, the listing exercise has failed
      miserably. In previous years there have been spectacular failures in listed GLCs
      and SOEs. (And of cause, being a GLC itself, one can forgive Singapore Press
      Holdings in being discreet in publishing these facts and figures).

      A half-hearted attempt with half measures yielding similiar results: Why have
      the transformations (from State Runned Vehicles to Listed Entities) been less
      then successful? This is mainly because these so called "Listed GLCs" take on
      the exterior facade of their private sector counter part in form (and not
      insubstance). The effect is a purely cosmetic one and is skin deep only.

      Safe for a change in incorporated name (with a LTD in the front), they continue
      to be managed and operated in all other aspects as civil service/public sector
      entities. Perhaps this is because the government (and in many cases Temesek
      Holdings) retains a stake in these companies and refuses to release its
      influence/stake in various GLCs and SOEs. This has also been a hotly debated
      issue under the recently concluded FTA and there is now pressure on the
      government to completely divest its remaining stake in these enterprises.

      Since Mr Chen has also alleged that the FEER articles were filled with
      "unsubstantiated and misleading statements", we will atempt to substantiate some
      of these statements and add clarity in this Sg Review exclusive. We append below
      some of the many articles from various foreign publications and journals, which
      shed further light into the camera shy and elusive corporate entities that are
      Singapore's GLCs, TLCs and GICs.

      [All data in this article (and the following attachments have also been sent to
      SPH companies for their comments]



      The coming challenge to Singapore Inc.

      Far Eastern Economic Review
      December 2004

      By Garry Rodan

      SINGAPORE�S vast array of government-linked companies (GLCs) has enabled it to
      manage the process of globalization with remarkable stability and effectiveness.
      Indeed, it�s fair to say the city-state is a rare contemporary case of
      successful state capitalism. Increasingly, however, the economics and politics
      of the GLCs� gatekeeper role have started to conflict. And as GLCs
      internationalize and the city-state�s markets are exposed to more intense market
      pressures, tensions will continue to rise.
      Nowhere is this more evident than in mounting friction over corporate governance
      of the GLCs. Unprecedented critical interest from international business in GLC
      activities has led to a closer analysis of how local rules and regulations are
      administered. Whether or not these pressures will lead to a fundamental
      transformation in the state capitalist model nobody knows. It is clear, however,
      that reconciling the economic and political pre-eminence of the GLCs is the most
      pressing challenge for the government of the new Prime Minister Lee Hsien Loong.

      The driving forces behind governance scrutiny involve pragmatic international
      business interests, which often rhetorically appeal to the concept of a level
      economic playing field. However, the issues at stake are intrinsically

      The GLCs, together with a long list of statutory bodies and the Government of
      Singapore Investment Corporation (GIC) that invests more than $100 billion of
      national reserves, form a complex network of power relations. This network is
      essential to the ruling People�s Action Party�s social control and political
      dominance. These institutions provide the Party with the resources for social
      engineering, as well as for political reward and punishment. The GLCs have
      tremendous influence over all Singaporeans� personal savings, housing, job
      opportunities and business contracts.

      The Singapore government responded to the 1997 financial crisis by aggressively
      embracing the rhetoric of good governance and transparency. The intention was to
      highlight the distinction between Singapore�s system and the crony capitalism
      and rent-seeking practices found elsewhere in the region. But this endorsement
      of global best practice is now bringing unintended consequences.

      Rhetoric was quickly followed by improvements to corporate accountability and
      disclosures, as well as more transparent macroeconomic data. At the time, the
      reforms largely bypassed the state sector, especially among the many GLCs which
      are not publicly listed companies. This divergence between rhetoric and practice
      did not escape international attention. The International Monetary Fund called
      for more transparent fiscal and monetary frameworks. Then in April of this year
      it raised concerns about the scope for conflicts of interest inherent in such a
      concentration of public decision-making power.

      The criticism of the Singapore government�s governance gathered momentum
      following the appointment in 2002 of Ho Ching, the wife of Singapore�s current
      Prime Minister Lee, as executive director of Temasek Holdings, the state-owned
      investment company. Last October�s move by Temasek to issue its first public
      annual report in its 30-year history is the latest attempt to respond.

      Temasek presides over more than $107 billion in assets and an investment
      portfolio of around $53 billion, and has long dominated the commanding heights
      of the domestic economy. Yet, in the government�s eyes, neither its importance
      to the Singapore economy nor the fact that it invests public money warranted
      routine, detailed public reporting and strategic statements. Temasek�s 2004
      report is a positive move in this direction, but there is still a long way to

      The reasons for increased governance scrutiny go beyond the Asian crisis; there
      is also a structural basis. International manufacturing capital has been either
      indifferent to, or actually supportive of, the role of GLCs in recent decades.
      However, many in the expanding financial, high technology and service sectors
      see it differently. They want to prise open more of the domestic economy than
      their manufacturing counterparts did, bringing them into greater conflict with
      governance regimes and transparency shortfalls protecting the interests of GLCs.

      Pressure for greater access to telecommunications, banking and other markets has
      gone hand in hand with mounting criticism of governance. Singapore�s ongoing
      economic transformation assures continued critical focus on the GLCs in these
      sectors. Foreign companies and their home governments want to be sure unorthodox
      governance arrangements in Singapore are not giving the GLCs an unfair
      competitive advantage.

      Economic downturns also gave rise to doubts about the role of GLCs. During the
      Asian crisis, Singapore�s GDP growth plummeted to just 0.4% in 1998 from an
      impressive 8.4% in 1997. The immediate policy response included a fuller embrace
      of economic deregulation and liberalization. The initial economic recovery was
      dramatic, with Singapore enjoying 10.3% growth in 2000. However, in the
      following year, the economy shrank by 2% in the worst recession since
      independence in 1965. The acute export dependence on the U.S. economy by the
      electronics sector that underwrote the sharp recovery set the economy back just
      as rapidly.

      In this context, a range of private-sector interests�including those within
      brokerage firms and other investment houses�argued not only for even more
      substantive liberalization and deregulation, but for reforms specifically to
      curtail the economic reach of the state. The government began to promote private
      entrepreneurship, including a target of investing S$62 billion of national
      pension contributions deposited with the Central Provident Fund.

      Up to a point, the government has been responsive here, parcelling out portions
      of the CPF to private fund managers. However, it is reluctant to surrender
      fundamental control over the CPF because through it a range of social policies
      are enacted. Indeed, the government increasingly deploys the CPF to foster
      self-funded health, educational and social security investments.

      Concern about the politicization of the GLCs has also escalated in recent years.
      Symptomatic of this was a document entitled �Why it might be difficult for the
      government to withdraw from business,� widely circulated in 2002 by email to
      international journalists.
      See: http://www.singapore-window.org/sw02/020210gl.htm#top

      It provided an in-depth listing of the extensive involvement in GLCs by present
      and former cabinet ministers and their relatives; active and retired senior
      military personnel; and serving and former members of the PAP. This included
      some 50 senior government officials holding �key appointments� while still in
      government. There were no allegations of corruption, but the clear inference was
      that a host of material and political interests are so deeply intermeshed in the
      GLCs that separating them would mean challenging the interests of the entire
      ruling elite.

      The government did not refute the accuracy of the document�s contents. However,
      in the same year its Economic Review Committee, set up to chart future economic
      directions, declared that all GLCs be run on �strict commercial principles and
      be subject to the discipline of the market.�

      This concession came about not because of domestic pressure, however, but to
      allay concern in the international business community. One manifestation of this
      was the protracted international negotiations leading to the United
      States-Singapore Free Trade Agreement. Washington sought to have this principle
      embedded in reforms as a way to increase access for American companies to the
      domestic market for banking, insurance and other professional services. It was a
      means to an end.

      This is the sort of pragmatic politics the PAP government can respond to. After
      all, a gradual opening up of sectors where GLCs are established is unlikely to
      see a loss of their dominance any time soon. And now that GLCs are setting their
      sights abroad, there is a bigger picture to bear in mind. According to one
      private economist, Singapore�s external economy could be valued at five times
      the gross domestic product by 2020.

      The reluctance of GLCs to release information in recent years has made it clear
      that the government doesn�t buy philosophical arguments about the public�s right
      to information. However, it has come to understand that promotion of the local
      bond market necessitates some degree of opening up, at least to rating agencies.
      It has also been sensitive to claims that the GLCs� lack of transparency
      conceals poor rates of shareholder return.

      This probably explains why the GIC produced a commemorative 20th anniversary
      publication in 2001 revealing the first detailed information about the successes
      and failures of past investments. Chaired by Lee Kuan Yew, the GIC was so
      secretive that even the composition of its board wasn�t public until the same

      On the eve of Temasek�s historic first annual report, Standard & Poor�s
      contended that Singapore�s investment strategy�largely in the hands of Temasek
      and the GIC�had produced �markedly inferior� returns (between 1.7% and 4%) in
      the last five years as compared to those achieved by comparable institutions in
      Hong Kong. Temasek�s report responded by pointing to a string of adverse factors
      in the last 10 years that held returns down, including the Asian financial
      crisis and the impacts of SARS and the 9/11 attacks in the US. It also declared
      that over the last 30 years Temasek has delivered a �robust� total shareholder
      return of 18%.

      Temasek�s disclosure hasn�t stopped criticism about its performance and the
      methodology of reporting, but it has led to highly favorable ratings from
      Standard & Poor�s and Moody�s for financial stability�ratings that will assist
      the local bond market. Meanwhile, the opaqueness of the GIC is now even starker
      by comparison.

      Resistance to further opening up at the GIC is likely to be more resolute. Prime
      Minister Lee has previously rejected calls to publish details on the GIC�s
      investments on the grounds that it would reveal information useful to currency
      speculators. Lee Kuan Yew has also declared, �It is not in the people�s
      interest, in the nation�s interest, to detail our assets and their yearly

      Despite such resistance, the Singapore government�s responses to sustained
      challenges over GLCs and related governance regimes have been continually
      evolving. Indeed, it will likely continue to make concessions to its
      critics�however reluctantly. Yet a key consideration behind Singapore�s
      governance regimes is the protection of the PAP�s political and economic
      control. The PAP may be prepared to explore new instruments for achieving this,
      but the objective itself is immutable. This difficult but not impossible
      challenge will define the new phase in Singapore�s state capitalism.

      Mr Rodan is director of the Asia Research Centre at Murdoch University in Perth
      and the author of Transparency and Authoritarian Rule in Southeast Asia
      (Routledge 2004).

      This article is part of a discussion thread on Delphiforums. You can view it in
      the context of the entire discussion by going to:



      Forum: the Sammyboy.com's Alfresco Coffee Shop � Forum
      Subject: Is Nepotism/Cronynism Corruption?
      From: (TRACYTAN866)
      To: (ALL)
      DateTime: 29/04/2005 18:12:21

      Many Singapore political leaders r proud that SG is relatively free of corruption. They like to say that Singpore has very little corruption. Is that really so?Corruption is more than just taking
      bribes or money. Corruption includes nepotism and cronyism. Can Singapore leaders truthfully say that we r free from nepotism and cronyism? Our record speaks for itself. Many singaporeans r
      distressed by the way networking works in Singapore and how many well connected ppl in singapore are favoured when compared to the average Singapore Joe.So r we really that corruption free which our
      poltical leaders r so proud off? Or shd our political leaders be ashamed of themselves when u see the amount of cronyism and nepotism in singapore?Edited 29/04/2005 18:13 ET ET by TracyTan866

      Edited 29/04/2005 18:13 ET ET by TracyTan866

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