Cablegate: Temasek Updates Charter to Reflect Commercial Focus

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1. (SBU) Summary: Singapore sovereign wealth fund Temasek Holdings
revised its charter to reflect what it called "a changed
environment," downplaying its former leadership role in managing
Singapore's state-owned companies and guiding the country's economic
development. The new charter emphasizes the fund's commercial
principles and takes pains to clarify the absence of political
influence in its investment decisions. Temasek's assets have grown
increasingly international in nature and the fund is looking to ease
concerns overseas that its investments may have a political bent.
Within Singapore, Temasek still has an iron grip on many of
Singapore's top companies, and although the fund says it no longer
plays a role in protecting Singapore's "critical resources," it
continues to have considerable stakes in and influence over the
dominant Singapore companies in strategic industries. End Summary.

Comparing Charters: 2009 versus 2002

2. (SBU) Temasek Holdings, one of Singapore's two sovereign wealth
funds, revised its charter August 25, altering its previously stated
mission of managing GOS investments in companies and playing a
development role in Singapore's economy. The new charter describes
the fund as an investment company managed on "commercial
principles," aiming only to deliver long-term value for its
stakeholders. The new charter makes no mention of Temasek's sole
shareholder, the Government of Singapore, and in fact eliminates all
reference to Singapore. Temasek released a separate background
paper on the charter that stressed that Temasek is independently
managed and that the Singapore government does not involve itself in
Temasek's business decisions.

3. (SBU) Temasek updated the original 2002 version to reflect what
Chairman S Dhanabalan said is a changed environment and context for
Temasek's investments. The 2002 charter had stressed the role
Temasek played in controlling companies considered critical to
Singapore's security and economic well-being. It outlined that
Temasek and GOS ownership and control would continue in Singapore
companies that were critical to job creation and Singapore's
security or economic well-being (e.g., utilities), or where
ownership facilitated GOS efforts to achieve "public policy
objectives" (e.g., public broadcasting and public housing). Temasek
would also seek to expand internationally certain Singapore
companies, such as DBS Bank.

4. (SBU) In contrast, the 2009 context document focuses on
Temasek's role as an investor with obligations to its
"stakeholders," including bondholders, partner companies, and
portfolio companies and their boards. A background paper with the
new charter states that although the Singapore Government is the
fund's sole shareholder, it does not "direct or influence" Temasek's
business and investment decisions. The new charter indicates that
Temasek may increase, hold or reduce investments in companies and
other assets, or "pioneer" new businesses and products to add
shareholder value. However, the 2009 charter eliminates language
that outlined Temasek's plans to divest businesses that were "no
longer relevant" or lacked international growth potential. Chairman
Dhanabalan said at a press conference that there was no longer any
discussion about which companies were necessary for the government
to hold on to, and any future divestments would be made from an
investment perspective. The new charter also indicates that Temasek
will be "an active shareholder" in the companies in which it has a
stake, but CEO Ho Ching later said that Temasek would be involved
only in decisions that would normally be taken to shareholders.

Assuaging International Concerns

5. (SBU) Temasek restated the fund's goals to ease international
concerns over potential political motivations by sovereign wealth
funds. In an August 26 meeting with Charge, Temasek Senior Managing
Director Michael Dee said Temasek had run into difficulties with
overseas investments in the past because of political perceptions
that its investments could be used as a tool of the Singapore
government. He highlighted the controversy surrounding the 2006
purchase of former PM Thaksin's telecommunications company in
Thailand and anti-trust cases brought against an Indonesian
investment. Dee said that Temasek strategy going forward would be
to steer clear of high profile international investments, but to
continue its large overseas investment portfolio. Dee said also
that although CEO Ho Ching has close political ties (her husband is
PM Lee Hsien Loong) and voted on big investment decisions as a board
member and CEO, she had little influence on investment decisions and
rather played a broader strategic role.

SINGAPORE 00000842 002 OF 002

Temasek Under Fire at Home

6. (SBU) The new charter comes on the heels of CEO Ho Ching's
decision to remain at Temasek, and her designated successor Charles
"Chip" Goodyear's abrupt departure (Ref A). Temasek, and
particularly Ho Ching, had been severely criticized earlier this
year for substantial losses at the fund, particularly ill-timed
investments in the financial sector. Critics also hit Finance
Minister Tharman last month after a sitting of Parliament where he
declined to provide details about the "strategic differences" that
led to Goodyear's departure. Online bloggers ripped him and Temasek
for a lack of transparency and accountability when Tharman responded
to MPs' questions by saying, "People do want to know, there is
curiosity, it is a matter of public interest. That is not
sufficient reason to disclose information...".

Temasek Still in Control

7. (SBU) Approximately two-thirds of Temasek's investments are now
overseas, but the fund remains the biggest shareholder in five of
Singapore's ten largest publicly traded companies and has majority
stakes in blue chip companies like Singapore Telecommunications
(SingTel) and Singapore Airlines. Dhanabalan said Temasek would
continue to hold the companies as long as they remained competitive
and he saw no reason to divest the companies. Dhanabalan explained
at a press conference that the focus in the 2002 charter had been on
the competition from Temasek-owned companies and other
government-linked companies that was crowding out other private
enterprise in Singapore. Temasek sought to divest certain sectors
and take the rest of its stable of companies international, a goal
in which it has largely succeeded.

8. (SBU) Temasek's Dee told Econoff that the GOS had agreed to the
new charter and its emphasis on commercial principles, and would not
object if Temasek decided to sell off its stakes in companies that
may once have been considered to be vital to Singapore's national
interest. He cited Temasek's divestiture of Singapore's power
sector earlier this year as an example, although Temasek played a
leading role in structuring a regulatory framework before selling
the power companies. CEO Ho Ching asserted that Temasek had few
similar remaining assets that could be considered critical
resources. However, Temasek maintains majority or 100 percent
stakes in companies that dominate several strategically important
industries, including: port-operator PSA; Neptune Orient Lines
(shipping); SMRT Corporation (public transport); MediaCorp
(broadcasting); Singapore Power; SingTel; Singapore Airlines and
airport ground handler Sats (Ref B); and Chartered Semiconductor.

9. (SBU) Comment: Temasek claims that it views its Singapore
investments as just that, but the Singapore government has a long
history of supporting its government-linked corporations and may not
have such a pragmatic view. Temasek has long held that its overseas
investments are made strictly on a commercial basis, and they likely
are. However, the GOS's management of its domestic investments with
a political bent may be a hard habit to break.


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