VZCZCXRO7490
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0842/01 2460212
ZNR UUUUU ZZH
R 030212Z SEP 09 ZDK
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7150
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 SINGAPORE 000842 
 
STATE PASS USTR 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN SN
 
SUBJECT:  TEMASEK UPDATES CHARTER TO REFLECT COMMERCIAL FOCUS 
 
REF: A) SINGAPORE 695; B) SINGAPORE 704 
 
¶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. 
 
SHIELDS