Government
Where’s the coordination?
It appears the right hand didn’t know what the left was doing, creating unnecessary uncertainty in people’s minds. By Seah Chiang Nee
Apr 3, 2008

On Mar 23, Temasek Holdings said it is “not a sovereign wealth fund” and therefore not covered by an agreement by Singapore, Abu Dhabi and the USA on the transparency of these funds.

A week later the Ministry of Finance contradicted it by saying that Temasek should abide by the agreement since the government had crafted it with the two other parties.

In real life, of course, the Finance Ministry wholly owns Temasek.

The contradiction between the two organisations, which are renowned for efficiency and transparency, has come as a surprise to many people.

At the time of this writing, there has been no official explanation as to how the contradiction arose.

‘Uneasy’ Singaporeans

The Temasek statement saying it is not a state fund bothered some Singaporeans, and they raised strong objections over the Internet. The mainstream media did not cover the controversy.

If Temasek’s money is not considered state fund, people ask uneasily, who then are the owners? Are the people’s mega-billions now in private hands?

One correspondent wondered what could be the motive that drove Temasek to declare that it is “not a state wealth fund” since no country or government is going to agree with it anyway.

”They can shout that it is an independent investment fund until they are blue in the face, no one will believe them,” he added.

Was Temasek trying to exclude itself from being subject to an international agreement that clearly covers Temasek and GIC (Government Investment Corporation)?

“It only creates unease among Singaporeans who are already worried about whether their reserves, invested or not, are safe.”

What bothered blogger ‘Under the Willow Tree’ is not just a matter of definitions or of whether Temasek is a Sovereign Wealth Fund.

The writer added in a letter sent to the Straits Times Forum, the following (which he blogs): -

“Rather, it suggests that for at least a brief week and a half, Temasek was a corporate entity that was able to decide on its principles of corporate governance, ahead and independently of its sole shareholder and owner, the Government of Singapore.

“Temasek’s corporate governance framework has implications that go far beyond standards of financial disclosure, into the realm of critical issues such as Temasek’s investment mandate and the decision-making process that Temasek uses to make or dispose of investments.

“These issues, amongst others, have as great an impact on allaying foreign suspicion and lowering the risk of protectionist measures, as the levels of disclosure adopted by Temasek.

“The process of determining a company’s principles of corporate governance is a principal issue for every corporation, particularly a company like Temasek that invests its funds on behalf of the country.

“Thus, I certainly hope that the two contradicting statements to the press were the result of an honest miscommunication between the two parties, and that my concerns are misplaced.”

Read in full:
http://utwt.blogspot.com/2008/04/apparent-lack-of-coordination-between.html

Background of the issue: -

Mar 24, 2008
Bloomberg report quoted by CNA.

http://forum.channelnewsasia.com/viewtopic.php?t=136882
WASHINGTON - TEMASEK Holdings said that it is not affected by an agreement by Singapore, Abu Dhabi and the United States on principles to increase the transparency of sovereign wealth funds.
'Temasek is not a sovereign wealth fund,' its spokesman Mark Lee said in a telephone interview yesterday. 'Temasek has to sell assets to raise cash for new investments and doesn't require the government to give approvals.'
An agreement by government-run funds of Abu Dhabi and Singapore to increase transparency will not shed more light on Temasek's US$118 billion (S$163.8 billion) portfolio, as the company said it already meets disclosure guidelines.
US Treasury Secretary Henry Paulson said on Thursday that funds, including the Government of Singapore Investment Corp (GIC), agreed to adopt rules for greater disclosure. Temasek said it already provides more information than government-run funds.
The US is pushing sovereign wealth funds to adopt new disclosure rules because of concern that a lack of transparency could spark a rise in protectionism.
The European Commission has called for an international accord to limit the political influence of state- owned capital pools, which have grown in number to about 40, managing between US$2 trillion and US$3 trillion.
Singapore's GIC and counterparts in China, Russia and Dubai have deployed record central bank reserves of as much as US$2.9 trillion, buying stakes in US financial services companies.
GIC has invested in UBS and Citigroup in the past three months, as banks sought to replenish capital after the value of their US sub-prime mortgage-related assets plummeted.
In January, Temasek paid US$6.2 billion for a 9.4 per cent stake in Merrill Lynch, after the largest US brokerage had the biggest loss in its 93-year history because of write-downs on US sub-prime mortgages and related securities. BLOOMBERG NEWS

April 1, 2008
DPA report

Singapore - Guidelines for sovereign wealth funds (SWFs) crafted by counterparts from the United States and Abu Dhabi apply to Singapore's investment arm Temasek Holdings, the finance ministry clarified on Tuesday.
Temasek initially said it was not affected by the new guidelines reached between the two countries and the Government of Singapore Investment Corporation and unveiled last week.
"We are not a sovereign wealth fund," said a Temasek spokesman. "Temasek has to sell assets to raise cash for new investments and doesn't require the government to give approvals."
The guidelines seek to ease concerns between SWFs and the countries receiving the investments by affirming they are purely for commercial reasons and will not lead to protectionist measures.
Since Temasek is wholly owned by the government, the ministry said the policy principles for SWFs are relevant.
"The policy principles for SWFs are broad guidelines that take into account the diversity of SWFs and the different contexts they operate under," Laurence Lien, the ministry's governance and investment director, told The Straits Times.
Temasek's annual reports already exceed the disclosure standards set out by the policy standards, he noted.
The government's relationship with Temasek is that of a sole shareholder. The GIC manages assets on behalf of the government.
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