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File - The Incestous World Of Singapore's State Runned Enterprises

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    A Sg_Review Exclusive; Special Focus on GLC=TLC=GIC By: Mellanie Hewlitt 9 Oct 2003 Singapore Review There s a new buzzword in town - TLC. Until recently, I
    Message 1 of 6 , Jan 1, 2009
      A Sg_Review Exclusive; Special Focus on GLC=TLC=GIC
      By: Mellanie Hewlitt
      9 Oct 2003
      Singapore Review

      There's a new buzzword in town - TLC. Until recently, I always thought
      that the acronym "TLC" referred to Tender Loving Care. But the
      Singapore Government has now coined a new phrase in a bid to distance
      itself (in the eyes of the public) from state runned and state funded
      corporate entities.

      Like it or not, Temasek Linked Companies, or TLCs, fall within the
      larger subset of "GLCs" which are viewed suspiciously by the general
      public. Many old hands in the industry will recognize this as basically
      old wine repackaged in a new bottle. 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.

      Peering beyond the cosmetic acronyms, the discerning observer will note
      that in reality, 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,

      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.

      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 Companies.

      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 and other 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 investment.

      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 - entrepreneurship.

      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
      secrecy. 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.

      In this Sg Review exclusive, we append below some of the many articles
      from various foreign publications, which shed further light into the
      camera shy and elusive corporate entities that are Singapore's GLCs,
      TLCs and GICs.


      Sat Mar 15, 2003 9:24 pm
      Subject: Investment Singapore style

      Investment Singapore style
      Asia Times
      By Lynette Ong

      THE Government of Singapore Investment Corporation (GIC) has enjoyed
      much publicity as the tightly-controlled press in Singapore sings
      praises for the secret investment society's 20th anniversary this

      "The story of the GIC combines all the ingredients of a best-selling
      textbook on best business practice - and a bit of a financial
      thriller too", says the editorial of the island's business daily.
      How much does the cheerleader know about the team it is betting on?
      Not a great deal, apart from what is officially released. The GIC was
      set up in 1981 to manage the country's foreign reserves which are
      said to exceed S$181 billion (US$100 billion) July 19 - one of the
      highest in the world - thanks to the country's high savings rates. It
      is a private limited company (PLC), wholly owned by the government,
      and comes under the purview of the Ministry of Finance.

      But it is no ordinary PLC. The law exempts it from filing balance
      sheets, profit-and-loss statements, publish annual reports or report
      to parliament. It is only accountable to the accountant-general,
      auditor-general and the president, to whom it submits its financial
      statements and proposed budgets. The special PLC is chaired by the
      elder statesman Lee Kuan Yew, while his son, the deputy premier, Lee
      Hsien Loong, is the second-in-charge. The GIC's website provides no
      clue on its asset allocation or investment returns and only contains
      what-an-exciting-organization stuff aiming at attracting young
      talents to join the team.

      The GIC invests half of its funds in global equities, 30 percent in
      bonds, 10 percent in real estate, 5 percent in venture capital funds
      and 5 percent in cash instruments. In terms of geographical
      distribution, the United States accounts for the bulk of its
      investments, while Europe and Asia each takes up a quarter of the

      The GIC claims its funds not only outperform global benchmarks such
      as the Morgan Stanley Capital World Equities Index, but its real rate
      of return always exceeds the G3's (US, Japan and Germany) average
      inflation rate of 5 percent. But this still begs the question, why
      does it refuse to disclose its returns if the performance is so

      The senior minister says the secrecy is to ward off potential
      speculative attacks on the Singapore dollar because the foreign
      reserves are often used to stabilize the national currency. Or
      perhaps the GIC's track record is not all that impressive - for as
      much as we know. The GIC was said to be one of the single largest
      creditors of China's Guangdong International Trust & Investment
      Corporation (GITIC) and it lost about S$200 million when GITIC
      collapsed in 1999 with about US$3 billion of debt. In 1996, a GIC
      officer was involved in a scandal for accepting S$2.4 million in
      bribes offered by a US fund manager to buy shares in various public-
      listed companies, although he was later acquitted on appeal. The GIC
      was also rumored to be involved in tie-ups with hedge-fund manager
      Long-Term Capital Management before its collapse in late 1998.

      The GIC's discretion might be for political purposes. It is, after
      all, one of the region's largest property owners with assets
      including the AT&T Corporate Center in Chicago, 70 Grosvenor Street
      in London, the Grand Millennium Plaza in Hong Kong and the
      International Broadcast Center in Sydney - home of the Sydney
      Olympics. GIC Real Estate - the company's property-investment arm -
      is said to have invested in 120 properties in more than 25 countries
      worldwide. But the total asset value has not been revealed.

      The GIC might be inviting political resistance if it bangs the gong
      every time a deal is sealed. Not least in neighboring Malaysia where
      it is said to own M$870 million (US$230 million) worth of listed
      assets and properties. This is despite its recent disposal of stakes
      in Malaysia Pacific Industries (MPI) - part of the Hong Leong
      Industries, and Mesiniaga - the distributor of IBM products in the
      country. Its largest investment in Malaysia is believed to be the 362
      million ringgit stake in Sunway City, a popular theme park and
      shopping mall located on the outskirts of the capital Kuala Lumpur.

      The GIC is also reported to have stakes in at least another 11
      companies listed on the KLSE, including KFC Holdings Malaysia, Star
      Publications, the New Straits Times Press, Tanjong, Resorts World,
      Berjaya Sports Toto, Public Bank and AMMB Holdings. Have you noticed
      the common threads in these investments? The hiccups in Malaysia-
      Singapore bilateral relations have been largely over some trivial
      matters or sibling rivalries - except the touchy racial issue. It is
      no wonder that expansion of Singapore's business empire into these
      Chinese-owned companies in Malaysia has gone largely unnoticed.

      The GIC is also one of Asia's largest private equity investors, with
      an estimated S$9.1 billion-S$18.2 billion invested in 150 private
      equity funds worldwide, reports the Straits Times. The company is
      said to have scaled down its investments in venture capital funds and
      moved into buy-out funds which finance companies undergoing
      restructuring to improve performance. This is a high-risk, high-
      return category as private-equity investors typically aim for 20
      percent annual returns when they sell off stakes in the restructured
      companies, says the president of GIC's private equity arm.

      The returns of these high-risk investments are as big a mystery as
      the organization itself


      Date: Sat Mar 1, 2003 7:16 pm
      Subject: More on GLCs; Singapore's "Giant Loss Making Companies"

      NORFOLK (Conneticut): You have to love the sound of SembCorp
      Industries Ltd in Singapore. It owns shipyards, an enginnering
      company and a net provider called Pacific internet.

      It's also a zoo-management company which presumably means it see that
      the monkeys and alligators get fed at the island's only zoo - a good
      one, actually, and also owned by the Government.

      SembCorp is one of about 40 large companies controlled by Temasek
      Holdings Pte, which is in turn controlled by the Singapore Government.

      The seven biggest of these companies -- telecoms to shipping lines to
      the national airline -- account for about a fifth of the Stock
      Exchange of Singapore's market capitalisation.

      There's a little bit of India in this, with its sprawling state
      sector born of the old ideals of Fabian socialism, and there's a
      little bit of the old Japan Inc, too.

      The main point is there's a lot of Singapore tied up in Temasek -- 60
      per cent of the island nation's economy, by the US embassy's count, a
      lot less according to Singapore's officials.

      Talk of reforming Temasek and getting the government out of business
      has been common in Singapore for years. The management is sluggish,
      critics say, some bad deals have been made, and it suffers that
      distinctly Singaporean malaise, a paucity of imagination and new
      thinking that reflects a certain culture of caution and even fear
      that anyone who has lived in Singapore knows all about.

      Not until lately, however, would anyone dare raise the problem of
      conflict of interest at Temasek and its various government-linked
      companies, or GLCs, as they are called locally.

      Mention of that "N" word was further out of the question. Lately,
      however, even Prime Minister Goh Chok Tong is happy to discuss
      nepotism, conflicting responsiblities among GLC executives, poor
      returns, and all the other problems associated with Temasek.

      What jarred the critical stones loose in the wall? It seems to have
      been the appointment in May of 49-year-old Ho Ching as Temasek's
      executive director. Ho also happens to be the wife of Lee Hsien
      Loong, the Deputy Prime Minister and Finance Minister, and that
      makes her the daughter-in-law of Senior Minister Lee Kuan Yew.

      We can avoid the topic of nepotism now the way one ignores an
      elephant in the living room - that seems to have been the calculation
      in high places.

      The most significant airing of the subject has come by way of a long
      story and an interview with Goh by Business Week's Michael Shari.

      "Can Singapore Inc fix Singapore Inc?" Shari asks. "Many analysts
      insist that only an outsider can break up the cozy corporate culture
      of patronage widely blamed for the lethargy of the GLCs.

      "Critics note that Temasek directors sit on the boards of
      corporations Temasek owns, and that board members of those GLCs sit
      on the boards of other GLCs."

      It is indeed a tangled web. A well-established corporate executive
      named Tan Boon Seng published a comprehensive list of who runs which
      GLC and who sits on which board and who is whose cousin or uncle or
      brother earlier this year.

      The people at {Singapore Window}, a Web site that made the document
      public, report only one minor inaccuracy - apparently an error of

      "The story is, we need to expand the pool of people," PM Goh told
      Shari in his interview. That's for sure. When Ho was named executive
      director, Temasek had to rejig its management structure so she
      wouldn't be reporting directly to her husband.

      Ho also stepped down as chief executive of Singapore Technologies, a
      defence contrator, so she wouldn't in that case be reporting directly
      to herself.

      There are problems in Temasek, clearly. Nepotism is one, the
      interests of Singapore's first family are another, efficiency is a
      third, and the role of the government in the economy is the fourth,
      and largest.

      Two months into Ho's term as executive director, we've already got
      some answers.

      Nepotism, it seems, is not a problem, or is a problem Singaporeans
      must accept, because the Lees are a family whose talents Singapore
      cannot do without.

      "The perception is there, I concede," Goh told Michael Shari.

      "But what do you do? Because of the perception, you don't appoint Lee
      Hsien Yang (the deputy PM's brother and chief executive at SingTel,
      among other posts)? You don't appoint Ho Ching, and any number of
      their relatives in high positions?"

      As to conflict of interest, Goh's thought is one articulated often
      enough in other circumstances. "It's awkward, we know that," he
      said. "There is some conflict of interest, but you know, we work for
      the common good."

      One must leave these questions to Singaporeans and their political
      process, such as it may be. Indeed, Singapore begins to look like a
      textbook example of how healthy, balanced development cannot be
      understood separately from healthy, balanced democratic

      The questions of true import, however, are the last two: the
      efficiency or otherwise of Singapore's GLCs and the right place for
      the state in the island's economy.

      On these points, Singapore is in a tough spot. For one thing, the
      true change to be effected is in the island's psychology, the way it
      stifles creativity and original ideas. For another, it needs to tread
      carefully now as it eases out of business - to the extent it intends
      to do so, that is.

      S. Dhanabalan, a former Foreign Minister and now chairman of Temasek,
      has already signalled that, while it might bail out of such things as
      zoo management, if anything it is likely to strengthen its hand in
      industries judged either strategic, such as banking or telecoms,
      perhaps, and those judged risky, such as biotechnology.

      I see nothing wrong with this per se. The wreckage of hasty
      privatisations is apparent from Mumbai eastward to Jakarta. In every
      such failure, the lesson is the same: Ownership is not the core
      issue, it's a secondary issue.

      The core issues are accountability, effective oversight, and sound

      Singapore's approach to state control of industry is, by any
      reasonable measure, yesterday's thinking, a hangover from another era.

      And the question of nepotism, or its perception, as the problem is
      now described, cannot be explained away.

      But the island-nation should take its time about it.


      From: Henny Sender
      Date: Sat Apr 12, 2003 12:51 am
      Subject: Singapore Invests Globally at a Premium, with No Results

      By Henny Sender
      The Wall Street Journal
      (Copyright (c) 2001, Dow Jones & Company, Inc.)

      SINGAPORE -- When government-linked Singapore Telecommunications Ltd.
      reached an agreement in March to buy Cable & Wireless Optus of
      Australia for $7 billion, the news was greeted with relief at home
      and derision elsewhere: Investors decided Singapore had paid too
      much, and SingTel's stock plunged.

      The same was true this year when Development Bank of Singapore
      purchased Dao Heng Bank Group in Hong Kong, shelling out more than
      three times book value for a mature, well-run bank. Singapore Inc .
      was finally closing deals in its desire to expand beyond the confines
      of its 208-square-mile home, but only by laying out substantially
      more than others were willing to spend.

      The "Singapore premium," as it is now being called, is well
      established. For those who believe Singapore is paying too much for
      what it is buying, the comparison that comes to mind is the "dumb
      money" shelled out by the Japanese in the 1980s. Then, companies
      around the world licked their lips when they saw Japanese buyers
      coming along with fistfuls of cash.

      To judge Singapore Inc .'s investment performance on the basis of
      what it pays is to miss the point, some Singaporeans argue. "High-
      tech investment is our future," declares Soo Boon Koh, founder of
      iglobe Partners, a local venture-capital fund seeded with money from
      the Economic Development Board's Technopreneurship Investment
      Fund. "We are driven by a sense that we are small and vulnerable,"
      says Teo Ming Kian, chairman of the Economic Development Board. "Our
      challenge is to figure out how we can be value-added."

      Whatever the returns, the scale of Singapore's investments is
      certainly of Japanese tsunami proportions. Singapore's government
      reserves of $120 billion make it one of the deepest pools of capital
      in the world -- and tens of billions of dollars of its money now
      sloshes around the world. Both its property arm and its private-
      equity arm are among the world's largest.

      Singapore has taken stakes in everything from Cisco Systems Inc. and
      Citigroup Inc. in the U.S. (in which it is one of the largest
      shareholders) to investment bank China International Capital Corp. in
      China. It controls real estate from the center of Chicago to the
      heart of Tokyo.

      Singapore also was part of every one of the three bids when
      Indonesia's chief automobile assembler, PT Astra International, was
      up for grabs last year; it was an investor in the first U.S. buyout
      fund established by Kohlberg Kravis & Roberts in the mid-1980s.

      No question, Singapore is in the big leagues of world investment. As
      for performance, though, the record is mixed, with frequent missteps
      in timing and in targets. Such fears that Singapore may have trouble
      managing what it has bought can cost the country big. Last year, for
      example, a 50% stake in ASAT Ltd. of Hong Kong was up for sale by its
      parent, QPL International Holdings Ltd., which is listed in Hong
      Kong. Chase Asia Equity Partners submitted a bid that valued ASAT at
      $400 million, while the government-linked Singapore Technologies
      group made an offer that valued ASAT at 16% more than Chase's bid.

      Yet, the board of QPL rejected the Singaporean offer, fearing slow
      decision making and bureaucratic meddling, according to its chairman,
      Tong Lok Li.

      As for practical shortcomings, consider SingTel's all-cash offer last
      year for Cable & Wireless HKT, made after insufficient consultation
      with the authorities in either Beijing or Hong Kong. That led to an
      embarrassing rejection in favor of Pacific Century CyberWorks Ltd.:
      Singapore offered cash instead of PCCW's mixture of cash and high-
      priced stock, but lost anyway. Other rejections have been far less
      public but no less embarrassing.

      "Singapore companies have made decisions that are commercially and
      strategically smart," says Michael Berchtold, head of Asian
      investment banking for Morgan Stanley & Co. in Hong Kong. "Execution,
      though, will determine whether they are winners.

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