Temasek Holdings Charter 2009 has generated considerable debate within Singapore.
Given the size and importance of Temasek, one can understand why.
In 2008, Singapore’s GDP was measured at S$257 billion, while at the last count, Temasek’s investment portfolio was valued at approximately S$130 billion.
The numbers indicate why constructive debate about Temasek’s future is meaningful for all Singaporeans.
Modification to the Charter
The 2009 Charter has made two key changes. Both the modifications are interlinked.
Firstly, the new Charter defines Temasek as “an investment company managed on commercial principles to create and deliver sustainable long-term value for our stakeholders.”
As a corollary to the above, the new Charter declines to mention any explicit role in ‘Godfathering’ any part of Singapore’s economy or capital markets.
The door remains ajar in case the Board and the Government decide active intervention by Temasek is required. This is due to ambiguity in the new Charter on the Board’s ultimate responsibility.
Is Temasek a commercial investment company responsible to stakeholders?
Is Temasek “an active value-oriented investor … in order to create and maximise shareholder value” ?
It may sound like semantics but note that stakeholders include all Singaporeans whereas the Government is Temasek’s sole shareholder..
What is Temasek’s role in the modern Singapore economy?
Consider the situation whereby the Government encourages the Temasek Board to invest in the under-construction casinos or some other investment for ‘the public good.’
Whether such an investment will result in long-term value creation for Singaporeans can be endlessly debated.
Institutional investors like Temasek make investment decisions based on a proprietary decision making process and the consequent lack of transparency may raise the hackles of the wider public.
Temasek Holdings was formed to manage the investments of the Singapore government. Until recently, it played a pivotal role in developing the city-state’s economy.
However, a lot has changed since Temasek’s incorporation in 1974.
Singapore is now a developed nation with a sophisticated economy and a capital markets structure. The government may have directed growth in the last four decades but the future now lies with the private sector.
In a recent opinion piece the Money Editor of the Straits Times asked:
“Who will grow the next SIA or Keppel? Shouldn’t this special nurturing role be part of Temasek’s role?”
The answer is the domestic and international capital markets.
If any business is commercially viable then, at a price, it will be able to raise financing for itself. Size is not an argument any longer. The international capital markets can absorb transactions of almost any size.
Today’s Singapore no longer requires Temasek to play the role of the stock and bond markets.
The author goes on to suggest that Temasek can play a part in developing an ‘eco-system’ to support industry clusters. “There have been many calls for the investment agency to earmark some of its resources for investment in smaller Singapore companies that need that extra boost to grow.”
Nothing wrong with the suggestion provided that any such investments by Temasek be made on commercial terms, in line with its charter. If Temasek wishes to create a unit to invest in unlisted small businesses or act as an incubator for others then it is free to do so.
For a long term institutional investor, there is no contradiction between acting commercially and investing in large green field projects / initiatives as long as the target investment returns are quantified.
If subsidies are required then they should come directly from the government’s operating budget and not from the savings of Singapore citizens.
Temasek is not the government’s ‘investor of the last resort’ and nor is it a charitable organisation
Recognising Singaporeans as stakeholders
Temasek is an investment vehicle that is managing money on behalf of Singaporean citizens, the ultimate beneficiaries. How do Singaporeans or the Temasek Board measure the long term performance of Temasek?
Performance measurement is critical not just to ensure that the management is held accountable for its action but also as a means to utilize the returns.
To illustrate, let’s say an individual investor makes an investment of S$100 and he expects an 11% p.a. return over 5 years. At the end of 5 years the investor determines that the return on his investment has been (say) 14% p.a.
In all likelihood the investor will take a portion of his excess returns (the equivalent of 3% p.a. for 5 years) and use it to reinvest elsewhere or for consumption purposes.
Now substitute Singapore citizens for the investor and Temasek as their investment manager. In other words, if Temasek exceeds its target investment return then as the owners of the funds Singaporeans should see the benefits.
At some point the government must create a mechanism for returning excess investment returns to their source – the Singapore taxpayer.
The Norwegian sovereign fund provides 4% of its annual return to the government each year. This not necessarily the preferred way of returning a national fund’s benefits but it illustrates the principle. It may be difficult to execute an equitable mechanism for distribution but an effort must be made.
Temasek has been entrusted with public money to invest on behalf of the nation. If it does well the benefits should accrue not just to its employees but to the nation at large. When there are investment losses the entire nation feels the pain, if only in sentiment.
In order to avoid future controversy the government will be wise to offer greater clarity to the Board about Temasek’s sole purpose, i.e. to invest profitably for the benefit of Singaporeans.
Some have cautioned against dropping the reference to Temasek’s nurturing role but business entities operate best when focused on clear long term objectives. There is too much money at stake in Temasek for there to be any confusion about possibly conflicting roles between ‘stakeholders’ and ‘shareholders.’
Being transformed into a commercial investment fund operation will reduce the temptation of a political government using Temasek as an investor of last resort.
Imagine how many proton car manufacturers can be supported by Temasek if a future government of Singapore decides that such projects are required for ‘national development purposes.’
This article was first published at The Grand Moofti Speaks
chip was a good appointment but his leaving already shed light on the leadership and management. temasek does not need another relative to be in charge, mdm ho should stay home and look after husband and mil. after making disastrous decisions, mm did acknowledge that decisions were made too early, causing singapore to lose billions.
temasek side stepped so many questions and played hide and seek on numbers and singaporeans do not have clear ideas:
i) how much was invested
ii) how much was lost
to be fair, they should publish figures for the last 5 years and we can see and judge.
there is little transparency on actual figures, everything is publish in bits and pieces. so it can only conclude they are trying to sweep things under the carpet. and these investments were supposed to alleviate the pressure on citizens through CPF returns, subsidy in housing, healthcare etc. but instead, cpf min sum and withdrawal age kept rising, hdb prices becoming unaffordable etc.. tells us that there maybe big problem with our investments, Singaporeans are made to pay exhorbitantly to cover the gaps/holes brought by massive losses.
Temasek has already made it crystal clear that it is responsible to only MOF, it sole shareholder, and I think they also recently clarified in the media that Temasek’s assets should not be confused with the reserves of Singapore. So, basically, all discussion on how their losses are related to the people of Singapore is futile. This is hard to swallow for most, if not all Singaporeans, but there is pretty much nothing to do about.
TH n GIC board of directors should include prominent Singaporean businessmen n enterpreneurs.
Invest in AV, never go wrong one!
Another question. What is our president role in this saga? He seems ABNORMALLY quiet. Other countries presidents have absolute power to make decision and safeguard its people. Ours? not to mention the amount of salaries he drawn annually. What are all Singaporeans so concerned about our money and he is not? Anyway, that amount is a bait to keep dolphine obedient and performed according to his master instructions.
By cleverly switching the role of MOF from “stakeholder” to “shareholder”, this means total elusion of public accountability by Temasek. However, we must not forget that MOF, being a government entity, is publicly accountable of its monetary policies and strategies to its people, including and not limited to the decision making process of the management and investment strategies of it’s investment arm, Temasek.
There is an email circulating over the internet that posted the ten most highest paid politicians are all from Singapore, and of all surprises we found president Nathan is drawing the highest at 3.9 million, slightly lower than PM Lee at 3.8m.
Being so highly paid our honourable President should at least query the losses of our reserves. We thought his duty is to safeguard our hard-earned reserves so that future rogue Government would not misuse them.
But then our former ex-president , Ng Teng Cheong, did make some effort to query some funds with some authorities, but was brusquely brushed off.
So we can’t blame President Nathan for keeping quiet, may well as enjoy the high pay
and prestige and other perks. I wish I could run for the Presidency too – easy job.
Ah, so because of the twist and turn, our dear TH has the privilege of remaining murky and take take risk? only in singapore
When Temasick break away from MOF, Why there is no check on the cheque should sign by five reputated person from the Public. Even GIC thousand B$ control by one Old Fart. Why is this so? No voice from the Public. If U voice out middle of the Night they came an arrest U.
thanks to their own doing (no less that of HC and a couple of Ministers – LHH, Tharma, etc), the mere mention of TH is likely to elicit a response of disgust amongst most singaporeans.
And PAP wonders why some singaporeans are so against them.
PAP leaders, do some self reflection and you will know the answer. But history has shown us that those in power has never known to recognise their own mistakes or folly, hasn’t it ?? So what is new …
“Now substitute Singapore citizens for the investor and Temasek as their investment manager. In other words, if Temasek exceeds its target investment return then as the owners of the funds Singaporeans should see the benefits.”
While i not sure how the excess returns, if any, is passed on to the citizens, i do like to know if their execs get bonus for excess returns?
who are these execs?
whose heads has rolled for losing half of our National Reserves? why is Ho Ching still the director? what has Finance Minister got to say about these losses? how is PAP going to take responsible for this?
apparently, we dont need Opposition Parties to lose money. PAP is doing it pretty well already
Quote Imran : “Imagine how many proton car manufacturers can be supported by Temasek if a future government of Singapore decides that such projects are required for ‘national development purposes.”
GLC means govmin linked companies.
How many works in these ?
tens of thousands?
If there is Change of govmin, will this lead to shakeups?
I have no clues. do you?
Temasek is similar to GLCs like Capitaland. The management teams of these organisations make aggressive investments using the funds provided ultimately by the people. If the investments happen to be successful, the management teams get paid handsomely, as in the case of Liew Mun Leong, who was paid a bonus of $20 million. If the investments dont do well, they give the excuse “sorry, market downturn, every company is doing badly”.And then they still continue with their job, waiting to exploit the next cycle upturn.
In other words, head they win, tail we (the people of Singapore) lose
The billions if guarded with prudence could create tens of thousands of meaningful jobs for Singaporeans.
Now it’s all gone with no regret.
#13 kilanjaro,
“…will this lead to shakeups”
you mean JOB CREATION ?
pls note : to me job creation can mean jobs created as in people are hired but this need not mean less people are unemployed. It can also mean people changing companies or working in non-glc.
I only have questions. I do not have the definitive answers.
Ultimately, we all singaporeans would be played into the hands of those MIW again if we do not stand firm to get things moving onto the right direction. Many new bills would be passed to stop you people from turning against them, infact they are already happening now. It’s either they collapse or we collapse soon, leaving those greedy politicians to maipulate things further to their personal gains at the excalating expense of the citizens of singaporeans.