Temasek Holdings: Singapore Connection at Center of Thai Crisis

Posted 21 September 2006 @ 10:08 pm EET     Print     Reprint     E-Mail     Comments

SINGAPORE (AP) - The overthrow of Thai Prime Minister Thaksin Shinawatra marked the culmination of a crisis partly triggered by the controversial Singaporean takeover of a major conglomerate from his family. Singapore's state-linked investment firm Temasek Holdings bought 49 percent of the Thaksin family-controlled telecom giant Shin Corp. in January for nearly 1.9 billion US dollars as part of Temasek's aggressive global expansion.

Temasek and Singapore officials were stunned when the takeover exploded into a national scandal in Thailand after it was disclosed that the family paid no taxes on its windfall gains from the deal. At the height of the turmoil, Thai protestors marched on Singapore's embassy in Bangkok and burned posters of its Prime Minister Lee Hsien Loong and his businesswoman wife Ho Ching, who is Temasek's executive director.

"We continue to monitor the situation, and at this stage it would be premature for us to comment," a spokesperson for Temasek said, stressing that the coup was "a matter for the Thai people to resolve."
Temasek's global corporate portfolio worth over 80 billion US dollars includes some of Asia's best-known companies including Singapore Airlines.

The Singapore government expressed concern over the power grab in Bangkok and said it hoped "the situation will return to normal as soon as possible." Rodolfo Severino, the former secretary-general of the Association of Southeast Asian Nations (ASEAN), said he did not expect Thai-Singapore relations to be affected by the change of government in Bangkok.

"I think the new (Thai) leader will come here and pay his visit and things will go on," he told AP. Singapore and Thailand have long enjoyed close bilateral relations and are among the founding members of ASEAN. Coup leader General Sonthi Boonyaratglin said the military seized power in order to unite the nation and vowed that a provisional governing council "has no intention to rule but to return power to the people as soon as possible."

Prime Minister Lee, who is also finance minister, told the Singapore parliament in April that Temasek weighed all the risks before acquiring Shin Corp and reiterated that the government does not interfere in the firm's investment decisions. The risks included "all major categories of investment risk, including market risk, credit risk, regulatory risk, operational risk and political risk," he said.

After the 49-percent buyout of Shin Corp, a Temasek-led group of investors increased its total stake to 96 percent through a mandatory offer but the takeover is now under investigation by the Thai commerce ministry following allegations of irregularities. "We have complied with all laws of Thailand. We are fully cooperating with the Ministry of Commerce," the Temasek spokesperson said.

Temasek reported a net profit of 8.3 billion US dollars in the year to March 2006, up 71 percent from the previous year, on revenues of about 50 billion dollars, up 18 percent. Temasek's sterling "AAA" long-term corporate credit rating was reaffirmed Wednesday by debt watchdog Standard and Poor's, with a stable outlook.

"It won't impact Temasek's ratings," Anshukant Taneja, director for corporate and infrastructure ratings at S and P's credit market services, said of the coup, citing Temasek's diverse portfolio and relatively low exposure to Thailand. Singapore's other national investment arm is the Government of Singapore Investment Corp (GIC), whose chairman is Lee Kuan Yew, the prime minister's famous father and founder of modern Singapore. GIC invests Singapore's foreign reserves, which are now worth well over 100 billion US dollars.