MPs Call for Greater Openness

Today ran this article on 26 May 2009:

MPs call for greater openness from Temasek and GIC
By Alicia Wong

AS THE world economy took one knock after another in the past year, Temasek Holdings and the Government of Singapore Investment Corp’s (GIC’s) investment decisions have also come in for some hard questions inside and outside of Parliament.

Yesterday, in their debate on the President’s May 18 address, Members of Parliament (MPs) added their voices to the call for more openness from the two investment companies in matters of public interest, as they homed in on Temasek’s recent divestment of its stake in Bank of America (BofA).

MP Inderjit Singh (Ang Mo Kio) called for a complete review on the management and investment of Singapore’s reserves, given how Temasek and GIC had deviated from what they were chartered to do. While GIC once followed conservative principles in long-term investments that delivered good returns, it has recently been investing in “more risky investments,” said Mr Singh.

Meanwhile, Temasek, which used to invest in Singapore or Government-linked companies in their early stages of development, “in fact moved more into what GIC used to do”, so that the two are “starting to look almost similar”.

A complete review of how Singapore’s reserves are managed from now on, would “require top-levelpolicy thinking on what the core objectives are, that these two funds should serve and how they should be managed,” said Mr Singh.

With Singapore’s reserves meant as “long-term shelter” for its citizens, “is it appropriate to allow GIC and Temasek to continue investing the way they have done in recent years, make somewhat speculative investments, like the way private wealth is shown to have been managed?” he questioned.

If Temasek does not return to its original investment roots, should there be another entity to invest and bring up Singapore-based companies, asked Mr Singh, “and most importantly, should we allow so much of our reserves to be placed with GIC and Temasek, or ... managed by people who understand these are meant to be long-term investments”?

On the BofA stake sale, Temasek had on May 15confirmed it sold its 3-per-cent shareholding through a series of sales in the first quarter — but kept mum on its reasons up till a week later, when it said that its “investment thesis” as well as the “risk-return environment” had changed. Still, it did not disclose the loss incurred on the deal, which stemmed from its 2007 US$5.9-billion investment in Merrill Lynch ($8.5 billion) that was later taken over by BofA.

Temasek’s reticence on the matter spawned even more speculation over the size of the loss, with some estimates hitting as high as US$4.6 billion.

MP Michael Palmer (Pasir Ris-Ponggol) highlighted how citizens speculated — online and offline — on Temasek’s reasons for divesting the BofA stake and the loss incurred. “Clearly, the public wanted to know the rationale and reasons behind the decision to sell what was originally meant to be a long term investment made with public funds,” he said.

“Unfortunately, due to the lack of information, speculation and discontent were rife,” he added.

While Temasek’s statement last Thursday was a “step in the right direction”, said Mr Palmer, “questions still remain”. While it is not expected to give detailed investment strategies, “answers to pertinent questions given after the fact, which will not impact investment outcome, would appear to be another matter”.

MP Zaqy Mohamad (Hong Kah) said: “We lost money that took generations and many good years to create. They are investing Singaporeans’ money and Singaporeans deserve greater accountability in how our money is being spent.”

Mr Zaqy highlighted the need to address issues such as matching the commercial objectives of the investment funds to the social objectives of the reserves. He also asked if there should be greater transparency “given to the public of the bonuses and performance of its staff”?