AsiaYouthMedia 亚青传媒 sinazen.com

Starting in the 80s, companies like DBS, SIA, Capitaland (originally two parts DBS Land and Pidemco at different times), parts of the Singapore Technology Group (later all consolidated into ST Engineering), SingTel, etc were listed on the Stock Exchange by selling shares to the pubilc, originally termed "privatization" but later more accurately described as "divestiture", since control of the companies has remained under the government holding companies. During the 90s and after, these government linked companies, with deep pockets and high technical expertise, grew very large, and overshadow the few privately owned companies under local tycoon clans.

Whatever the original intentions, a number of events occurred in the business and political spheres all pushing against reducing the span of control. The Pan Electric stock market crisis, started by the collapse of several companies headed by the Malaysian politician-businessman Tan Koon Suan with a chain of debts to a number of stock broking companies forcing the market to suspend trading for several days, initiated a process whereby the stock exchange changed from a club of local stock broking firms to a listed company under government supervision.

The case of DBS Land/Pidemco, merged and now known as Capitaland, provides an illustration of the rise and rise of Singapore Inc over the past 20 years. When DBSLand was first listed, it had just a small number of properties (Plaza Singapura, Raffles City being the larger items); the later listed Pidemco had South Bridge Centre etc. With deep pockets and government backed status, it went on a continuous expansion, both buying up properties that came on the market (e.g, IMM), building new ones (e.g., Capitaland Tower) and developing/selling condos, and in fact found itself rather overextended during the prolonged Asian Financial Crisis when property values and sales numbers were both very low and accumulated debts high, such that Capitaland shares were down to nearly $1 during the early 2000s. However, by placing a number of properties into Real Estate Investment Trusts, it was able to turn assets into liquid cash while still retaining control over them (the difference being the need to provide REIT shareholders with regular payouts, whereas ordinary shares do not guarantee dividends). It also went into property developments in China and other foreign countries.

To do these successfully, a company need to be well connected - innovations like REIT require approvals by regulators and stock exchanges, which a well connected organization is more able to lobby for, and foreign businesses often require some diplomatic clout. These were readily available to Capitaland, but less so to others, e.g., Dragonland had considerable difficulties with its China property development, but were better able to overcome them after it was absorbed into Keppeland.

DBS GROUP HOLDINGS LTD
CAPITALAND LIMITED
SINGAPORE AIRLINES LTD
SINGTEL
KEPPEL CORPORATION LIMITED
SINGAPORE EXCHANGE LIMITED
CHARTERED SEMICONDUCTOR MFGLTD
SEMBCORP INDUSTRIES LTD
KEPPEL TELE & TRAN
SINGAPORE POST LIMITED
STARHUB LTD
SEMBCORP MARINE LTD
STATS CHIPPAC LTD
KEPPEL LAND LIMITED
SINGAPORE PETROLEUM CO LTD
COMFORTDELGRO CORPORATION LTD
NEPTUNE ORIENT LINES LIMITED
MOBILEONE LTD
ASCENDAS REAL ESTATE INV TRUST

The following is a table of 25 largest companies on the Singapore Exchange; they together count for 46% of the market cap, and Temasek companies count for about half; a similar situation holds in the other 54% of SGX companies

Temasek has been expanding overseas, but has encountered problems in Thailand (see previous article), Indonesia where it was accused of violating rules on telecom company % shareholdings, and in China over the same issue relating to banks though the issue was handled by the Chinese government in a more amicable way; its attempt to invest in China Eastern Airline is also meeting some opposition and is as yet unresolved.

Temasek became the largest shareholder of Standard Chartered Bank by buying the stake of the Khoo Teck Puat estate, then in some legal jeapody because, when lawyers went through his accounts for probate, he was found have violated some stock listing rules in relation to his shareholdings in a number of SGX companies (not SCB itself). Most recently it made a capital injection into Merril Lynch which suffered from major losses in mortgage related securities. In each case, Temasek was able to make use of an unanticipated opportunity in a timely fashion because of its liquidity.

Temasek had repeated run-ins with foreign journalists over the fact that its CEO happens to be the wife of the Prime Minister/daughter in law of LKY: any suggestion of nepotism, however carefully couched (such as the Financial times article "Sovereign funds try to put on an acceptable face" three months ago) would bring on threats of lawsuits and usually results in quick retraction with payment of damages.

The arrival of Ho Ching at Temasek did mark a drastic change: previously it merely acted as a holding company, whose main influence on its companies is through the selection of their board members and senior management officials, now Temasek actively seeks out international investment opportunities on its own. Whereas companies like DBS and Singtel had previously ventured overseas, they are constrained by corporate prudence and shareholder oversight requirements applicable to publicly listed companies, whereas Temasek is not and could act with greater freedom.

Temasek and GIC, together with midde east and mainland china government investment funds, came to the rescue of US investment banks in trouble because of their losses and asset freezes resulting from the mortgage problems - like Bear Stearns though less seriously, they were unable to raise cash from the mortgage backed bonds they hold and needed capital injections. This has added urgency to their need to show greater transparency, to convince the market that they operate stricly according to commercial, not political, considerations.

I have long thought (and said so during a lunch a few years ago with Vivian Balakrishnan, when he sought feedback from longterm PRs about what factors attract PRs to stay on - I had to say quite honestly that my case probably was fairly unique so has little relevance to others) that the two organizations should operate more like mutual funds or unit trusts with all citizens as shareholders, who get annual reports about the performances as well as regular dividends. I have heard vague comments of uncertain origin that revealing the details would put Singapore at a commercial disadvantage, even mentioning attacks on the currency (like George Soros speculating successfully against the UK pound - but not long after he lost when the ruble crashed), though the exact connection escapes me. However, I think the real consideration is the general Singapore government philosophy of not engendering an attitude of entitlement among the people; yet, this is all the more reason to bring in such revelations before being pressured into doing it,whether from internal or external reasons - doing something at your own choosing means you can choose what, how much and which way.

added on 27/4/08

the sunday times carried an article on this; the UBS and Barclay share buys have clearly suffered a paper loss; the merryl lynch and citicorp investments were convertible bonds, one with no deadline, one with compulsory conversion in 2 years; I assume the conversion prices are both considerably higher than the current market price, and the force conversion would be out of money unless a quick recovery occurs