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Investment Singapore style

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  • Lynette Ong - Asia Times
    Investment Singapore style Asia Times By Lynette Ong THE Government of Singapore Investment Corporation (GIC) has enjoyed much publicity as the
    Message 1 of 3 , Mar 15, 2003
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      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
    • By Richard Borsuk
      The Economy: Singapore s Struggle By Richard Borsuk 557 words 20 March 2003 Far Eastern Economic Review 12 English (Copyright (c) 2003, Dow Jones & Company,
      Message 2 of 3 , Mar 16, 2003
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        The Economy: Singapore's Struggle

        By Richard Borsuk
        557 words
        20 March 2003
        Far Eastern Economic Review
        (Copyright (c) 2003, Dow Jones & Company, Inc.)

        Its unemployment rate is worryingly high. Its new budget didn't do
        enough to spur growth, some moan. And there's gloom about the ability
        of this once fierce Asian tiger to claw its way back to good growth

        No, this isn't Hong Kong. It's Singapore, which like its longtime
        rival is grappling with an array of economic challenges with limited
        resources. Though some Singapore developers are making money in
        China's real estate market, Singapore can't rely on a vast Chinese
        hinterland for future markets and growth. Instead it is seeking to
        reinvent itself by acquiring new skills, in areas like life sciences,
        finding new export markets and broadening exports beyond electronics
        to other products, most notably pharmaceuticals.

        In Singapore, decades of strong fiscal conservatism produced billions
        of dollars of surpluses, giving it plenty of cash. But to grow when
        waves of investment keep flowing to China, Singapore needs much more
        of what Hong Kong has in ample supply: entrepreneurial flash and
        investor buzz -- the kind that comes from being gateway to China.

        Singapore's strong financial position gives it the option to spend
        and run bigger deficits during tough times. But Singapore is more
        concerned about staying competitive and dealing with long-term
        structural problems than about a cyclical downturn. "We must find new
        sources of growth or else stagnate and decline," Deputy Prime
        Minister and Finance Minister Lee Hsien Loong said on February 28
        when presenting the budget for the year beginning April 1.

        Some businessmen and analysts think the planned budget deficit --
        less than 1% of GDP -- is too small, and are disappointed Singapore
        didn't cut income taxes. (Personal and corporate taxes were cut to
        22% in 2002, and the government says they will be cut to 20% by
        2005.) Others differ, saying the government can easily boost spending
        later if global economic conditions are worsened, for example, by a
        messy war in Iraq.

        But Singapore's pragmatic approach to attracting foreign investment
        won't change. One day before the budget speech, the government
        announced a scheme to let foreign computer technicians arrive and
        work immediately without the hassle of red tape that expatriates
        might find elsewhere in Asia. The move opened the way for India's
        Satyam Computer Services to choose Singapore for its disaster centre
        to protect clients against information system breakdowns.

        The city-state's bid to build biotechnology into big
        business "appears to be coming along well," says Singapore
        Confederation of Industries economist Tan Kee Wee. The government
        valued biotechnology production last year at S$9.7 billion ($5.6
        billion), a 48% rise from 2001.

        Changing mindsets will come much more slowly than altering policy.
        Overall, the government's big role in the economy still "doesn't
        leave much room for spontaneous entrepreneurial activity," says Manu
        Bhaskaran, an economist with the Washington-based Centennial Group.

        But job cuts, like the 800 recently by port operator PSA Corp., may
        force more Singaporeans to get more entrepreneurial. Prime Minister
        Goh Chok Tong last week praised a 34-year-old graduate of a United
        States university for her ability to reinvent herself. Her new job?
        She sells roasted chestnuts on the street.


        Morgan Stanley trims Singapore growth forecast,
        cites inadequate budget

        Agence France Presse
        March 3, 2003

        US investment bank Morgan Stanley said Monday, March 3, it was
        lowering its 2003 growth forecast for Singapore, saying last week's
        budget for the year to March 2004 offered little stimulus for the

        "The F2003 (financial year 2003) budget in our view will not offer
        much cyclical support to the fragile domestic economy and the
        Singapore market," the bank's economist Daniel Lian said in a report.

        For 2003, Lian said the island's gross domestic product was projected
        to grow 2.9 percent from 3.4 percent previously forecast.

        The government had said growth this year would likely come in at the
        lower end of the official projection of an expansion between 2.0 and
        5.0 percent.

        In his report, Lian said the bank's previous growth forecast of 3.4
        percent was based on the premise there would be additional fiscal
        support to aid the economy should global growth weaken.

        Last month, the US investment bank cut its global growth forecast to
        2.5 percent from 2.9 percent, citing higher oil prices and heightened
        geopolitical risks.

        "The F2003 budget is not an expansionary budget... we believe the
        lack of meaningful fiscal support to the real economy augurs poorly
        for the growth outlook," Lian said.

        "We are therefore downgrading our 2003 growth number to 2.9 percent
        from 3.4 percent," he said.

        On Friday, Finance Minister Lee Hsien Loong unveiled a budget deficit
        of S$1.2 billion (US$689.7 million) for the year to March 2004.

        It was the third straight year that Singapore was projecting a fiscal
        deficit, a rare situation for Southeast Asia's wealthiest economy
        which has traditionally stressed fiscal prudence.

        Lee said the deficit was needed to lift the economy which is still
        struggling to recover from the 2001 recession, Singapore's worst
        downturn in more than three decades.


        Budget 2003 in a wrap:

        By: Mellanie Hewlitt
        Source: Singapore Review
        Date: 6 March 2003.

        It seems that with the recent economic down turn, the government
        along with the Straits Times (its pet mascot) have taken pleasure in
        taking pot-shots at the very people who are under its care.

        If Budget 2003 was a slap in the face from the PAP, then the latest
        article from Ms Chua Lee Hoong in the 5 March 2003 issue of the
        Straits Times must surely be a follow-up kick in the groin.

        The basic thrust of Ms Chua's long winded and tedious article is that
        during this difficult period;
        a) Singaporeans are "on their own";
        b) We should not depend on the government for "hand-outs"
        and "freebies"; and
        c) We are to be self-reliant and have lower expectations.

        Ms Chua referred to a "nascent Singaporean addiction to handouts",
        I can only conclude that this addiction has been inculcated and
        inherited from the million dollar remuneration packages afforded to
        PAP Ministers. As they say...."like father like son", though in this
        case the "son" (being Singapore citizens) might take stiff offense in
        the comparison, and rightly so. Singaporeans are not asking for
        free "handouts" here. What we are asking for are jobs, everyone in
        the private sector puts in their full 12 hour day and more.

        Speaking in defence of all Singaporeans, the allegations
        of "handouts" are all the more inappropriate when we consider that
        Singapore is not a welfare state, unlike the US and UK. Can Ms Chua
        please clarify what she means by "handouts"? In a state bereft of
        social welfare, there is no room for free-riders in the private
        sector. The qualifier here is the private sector. The sad ironical
        twist to this is that whilst ministerial salaries are pegged to the
        best of the private sector, they are also insulated from market
        forces. Life is good when you can have your cake and eat it.

        This is fact, unless you are part of the Ruling Elite, life is not
        easy in Singapore. No Work equals No Income, literally. Its that
        simple, no rocket science is needed to understand this very harsh
        reality. Basically if I do not work , I do not eat. At least that is
        the unspoken law in the private sector. And how can it be otherwise
        if Singapore Inc is to endure as a viable going concern, the impetus
        for growth has always been from the private sector as it is
        inextricably intertwined with the ebb and flow of the international
        free market.

        But in recent decades, additional to the challenges of an
        increasingly competitive free market, private companies and workers
        alike have also had to contend with meddlesome government
        interventions. These come in all shapes and forms, from archaic laws
        and policies drafted in some ivory towers, to lumbering State Owned
        Entities and Giant Loss Making Companies. In one way or another, they
        have all added to the burden of an already difficult work and living

        Indeed if life is so rosy here in Singapore and Singaporeans have
        only to wait "by the river for roast ducks to fly into their mouths",
        why are people leaving this little island? Why are birth rates
        falling? Why is unemployment on the rise? Why are fresh graduates
        unable to find work? These questions are greeted by a muted silence
        from our leaders that is deafening. The bottom line is that these
        signs are indicative that living conditions and quality of life are
        fast deteriorating.

        Perhaps by "handouts" Ms Chua may be referring to the Economic
        Restructuring Shares that the government "handed out" co-incidentally
        during an election year. Give us all a break here, Singaporeans just
        want the chance to earn an honest day's wage. So I think the PAP has
        maxed out whatever PR mileage they can from the ERS.

        But then again, perhaps Ms Chua and the PAP are of the view that jobs
        are the equivalent of "handouts". Afterall, slaves are "given" jobs
        by their masters, and this is a privilege, not an entitlement so its
        argued. But taking this analogy to its final conclusion, the master
        here is unable to provide the slave with any suitable jobs. This is a
        failing on the master, and not on the slave.

        Make no mistake, in the current recession what is on top of the
        wish list of average Singaporeans is JOBS, and decent jobs at that.
        The average Singaporean does not expect freebies, we will work and
        earn an honest days living. But have the PAP ministers taken a look
        out of their ivory towers off late?

        Unemployment rates are soaring and fresh graduates as well as
        seasoned workers alike are unable to find employment in their chosen
        professions. And having graduates (and MBA holders) working as
        hawkers and cab drivers is not an ideal arrangement. From a purely
        economic perspective there is tremendous wastage as costs and
        resources have been spent training these graduates and their skills
        should be put to good use.

        Indeed this issue was explored in-depth in a previous issue (22 Jan
        Singapore Review.

        The government has called upon Singaporeans to lower expectations and
        accept lower wages and longer work hours. These are already harsh, on-
        going realities in the private sector. Ms Chua has also quoted DPM
        Lee: "In DPM Lee's words: 'We must shake free of our old mindsets,
        and adjust our positions to better face a changed world order..."
        These words would be more credible if Singapore's leaders practice
        what they preach. Whilst the average Singaporean is "adjusting" to
        retrenchments, unemployment, pay cuts, and working longer hours for
        less, Singapore's Ruling Elite continue with their million dollar
        salaries, blissfully unaware of the harsh realities faced by its

        A good leader leads by example and not merely by lip service, so
        perhaps its time Singapore leaders descended from the ivory towers
        and put their money where their mouths are. Otherwise, they will have
        a huge credibility problem with the masses. If a leader calls on the
        people to be less choosy, to accept lower salaries and work longer
        hours, he must first lead the way by example. Otherwise he has no
        right to call upon others to undertake a task that he himself is
        unable to endure.

        If anything, one gets the notion that the government is abandoning
        its citizens in this hour of need. The call to be "self-reliant"
        translates into an admission that this government is unable to
        provide any satisfactory answers to lead the country out of the
        current economic recession. This admission in itself is forgivable as
        we recognize that our leaders are after all mortal human beings and
        not god.

        But what is unacceptable is the fact that these are amongst the
        HIGHEST PAID MINISTERS in the world, raking in annual salaries well
        in excess of a million dollars per annum. In the past, such handsome
        salaries have been "justified" on the merits that they were required
        to attract Singapore's "best and brightest" and ensure world-class
        performance. But looking at the dismal state of the economy, it is
        massively difficult to see what constitutes "world class performance."

        Ms Chua has mentioned that "The Government's protective umbrella is
        shrinking in size,". There are many who are trying to reconcile her
        statement with realities of life in the private sector. Many are of
        the view that the government has no business in the private sector,
        and view the dominance of the GLCs in a negative manner. The GLC
        threat has even been formally tabled as an issue to be addressed by
        the US, and is a major concern of US firms doing business here. If
        this is an example of the government's "protective umbrella", then
        I'll take my chances with the elements any time. The odds are far

        Fortunately, the average man on the street has seen through the veil
        and the general consensus is that the latest Budget 2003 is not the
        right medicine that will cure the economic malaise that is present in
        the economy. It is a mere placebo. Singaporeans recognise that latest
        budget leaves many issues unresolved. If this is a product
        from "Singapore best and brightest" who are also amongst the most
        highly paid ministers in the world, then it is bad news for the city
        state as the one solitary statement that is obvious from the budget
        is that the current leaders lack the mantle to lead the country out
        of the doldrums of the current recession.

        "Inadequate" was the polite understatement used by US investment bank
        Morgan Stanley in describing Budget 2003 when it announced on Monday,
        March 3, 2003 it was lowering its 2003 growth forecast for Singapore,
        saying last week's budget for the year to March 2004 offered little
        stimulus for the economy.

        "The F2003 (financial year 2003) budget in our view will not offer
        much cyclical support to the fragile domestic economy and the
        Singapore market," the bank's economist Daniel Lian said in a report."

        "The F2003 budget is not an expansionary budget... we believe the
        lack of meaningful fiscal support to the real economy augurs poorly
        for the growth outlook,"

        For a quick one minute round-up of Budget 2003, click on below link;

        What is even more disappointing is that Budget 2003 follows closely
        after release of an equally disappointing ERC report which was
        already critisiced for its lack of substance and originality.

        The ERC report touched on nurturing private entrepreneurs.
        Singapore seems to be the only country where entrepreneurs need to
        be nurtured through a ministry of entrepreneurship. Would it not make
        more sense if the Government just left enterprising
        Singaporeans to do what all good entrepreneurs do best ? generate
        ideas and wealth in an innovative society? Instead the Government
        insists on keeping the citizens in a political straight-jacket just
        so that it can satisfy its obsession to control society, and then
        sets up a ministry to encourage creativity! So by all means please
        take back that umbrella and shove it!!

        All eyes are now back to the US economy, which is the only hope for
        domestic recovery. After all, it is clear that our million dollar
        ministers /leaders do not have the answers for the problem.

        Ms Chua has also stated that we ("these educated types") should be
        less concerned with "what new grant can be invented or how much more
        to be given to the needy", and focus instead on "how best to ensure
        that jobs stay in Singapore, how to bring new jobs here, and how to
        propel the economy to that higher level where Singaporeans can still
        enjoy the incomes they are used to, together with the assurance of
        steady employment." Begging your pardon, but this seems to fall
        within the job description of our million dollar ministers. But if
        the PAP is willing to pay us SGD1.6 mio a year as basic salary, I am
        sure there are many in the private sector who would be ready, willing
        and able to take up her challenge.

        What a great contrast there is between the bona fide opposition
        articles and insightful discussions in the New York Times, and the
        propaganda ridden poems of love and political tributes of adulation
        in the Straits Times, between Maureen Dowd and Chua Lee Hoong.

        Well, how like the local press to always blame Singaporeans, never
        the government. But hey, when you are in such squeaky clean PAP
        outfits of virgin white, it wouldn't do to have even a speck of dirt
        on it, hence the need for convenient fall guys, all 4 million of them.

        For those that are into propaganda literature, Ms Chua's article will
        be a good read for you.

        Oh yes, about the roast ducks that Ms Chua has sighted, which fly
        on their own volition into her mouth, this particular species do not
        thrive in the private sector, they are native only within GLCs, State
        Owned Enterprises and on breeding grounds of the PAP. I certainly
        have not been privileged enough to sight these mystical creatures,
        let alone taste their succulent flesh. But I am sure Ms Chua, being
        employed in SPH, is in a unique position to give us a first hand
        account of this dish.

        For a quick 1 minute description of Budget 2003 in a rap, click on
        below link under. Trust me, you will not be disappointed; "Splish
        Splash"…….it's the brown and round thing in the tub.
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