Backlash for Temasek over ‘Singapore imperialism’

By John Burton of The Financial Times
Published: March 24 2006 00:27 Last updated: March 24 2006 00:27

When Thai protesters recently set alight pictures of Ho Ching, chief executive of Temasek Holdings, it was a further indication that the Singapore state investment company was facing growing political problems as it expands across Asia.

The burning of images of Ms Ho and her husband Lee Hsien Loong, the Singapore prime minister, was part of protests in Bangkok over Temasek’s $1.9bn (£1.1bn) purchase of Shin Corp from the family of Thaksin Shinawatra, the Thai prime minister. Demonstrators are angry that the family used legal loopholes to pay no tax on the deal.

But the protests also underscored the fact that Temasek is becoming a target of a nationalist backlash in Asia, with critics raising questions about its close links with the Singapore government and its secretive nature.

Singapore “should adhere strictly to transparency and good governance”, said the People’s Alliance for Democracy, which is leading the Thai protests. It also accused Temasek of “colluding” with Mr Thaksin.

“I’m worried about how this will affect Singapore’s standing in south-east Asia, since Thailand is probably our closest friend in the region,” said a Singapore-based political analyst.

It is not the first time that investments by Temasek and its affiliated companies have been greeted with suspicion.

When Singapore Telecommunications bought Australia’s Optus mobile phone operator in 2001, opponents warned of “Singapore imperialism”.

Indonesian lawmakers are lobbying for Temasek’s ST Telemedia to give up control of Indosat, a mobile phone operator, because they worry about Singapore’s dominance in the local telecoms sector, with SingTel a main shareholder in another mobile operator, Telkomsel.

China decided to halve Temasek’s proposed 10 per cent investment in Bank of China because of concerns about Singapore’s growing influence in the local banking sector. Temasek is the only foreign investor to have stakes in three Chinese banks, including China Construction Bank and China Minsheng Banking.

Temasek has tried to distance itself from the Singapore government in spite of being 100 per cent owned by the Finance Ministry. It describes itself as “an investment company based in Singapore” whose decisions are based solely on commercial criteria. It says associated companies act independently of Temasek in making investment decisions in spite of Temasek being represented on their boards.

But some foreign authorities do not find that explanation persuasive. South Korean regulators this week blocked Singapore’s DBS Bank from buying Korea Exchange Bank because of its links to Temasek, which is the bank’s biggest shareholder.

Temasek is classified in Korea as a non-banking group, barring it from owning more than 10 per cent of a Korean bank. The regulators suggested DBS’s ownership structure meant it was acting on behalf of Temasek, although DBS denies the bank’s management is influenced by Temasek.

India last year vetoed a bid by ST Telemedia to buy a stake in Idea Cellular, a mobile operator, because SingTel already held a interest in Bharti Televentures, the market leader.

Indian law prevents a foreign investor from having big stakes in two telecoms companies. Temasek argued unsuccessfully that SingTel and ST Telemedia were separate entities in spite of having common ownership.

Some critics have seen a political agenda in Temasek’s investments as Singapore seeks to increase its influence in the region. Temasek says there is no government involvement in making deals.

Analysts suggest Temasek could gain greater trust by becoming more open about its operations. But Ms Ho and other Temasek executives have refused to make themselves available for media interviews, which has given rise to an image of secrecy.

“It would be better for Temasek if it engaged the media more actively to allay suspicions,” said Mr Bhaskaran.