"The social object of skilled
investment should be to defeat the dark forces of
time and ignorance which envelope our
future." - John Maynard Keynes
SINGAPORE - Like a magician
springing a rabbit from under a hat when
everything else lacks spunk in a fairground, the
recent announcement by Singapore's Temasek - the
government's investment company - of a worldwide
acquisition of assets totaling about US$7.6
billion in the year through to March is no ordinary
waving of
the magical wand.
It showed firstly, that
as the trusted custodian of the city-state's
future, it was in no way ignoring "the dark forces
of time", cited by Keynes.
And secondly,
the careful strategic planning that went behind
the elaborate calculations resulting in the
acquisitions also showed how masterful the whole
exercise was.
In fact, taken together, the
acquisitions constitute more than a question of
"skills" and "dark forces" - they were almost
invariably about giving an insurance policy to
Singapore's people.
And when the yield
factor is juxtaposed with the above forces, it
gives good reasons for Temasek's board and its
chairman, S Dhanabalan, to keep humming.
Yet the reasons for these investments do
not just stop there. They are about the very
quintessence of Singapore itself. As a tiny
island-republic, Singapore lacks natural resources
for its people to fall back on. So with every
investment that Temasek pulls off; more than a
skill is issued about such a venture. It is not
merely a skill; it is an art form.
And
because these "opportunities" form the cornerstone
of every acquisition; what inevitably arises is
Temasek turning the globe into its marketplace to
move in, acquire and consolidate.
So be it
a bank in China, Malaysia or a budget carrier in
India, if an opportunity beckons, Temasek is sure
not to leave that chance to chance.
Inaugurated in 1974 to oversee the state's
participation in the economy, very little is known
of Temasek except for the control or partial
control it wields in companies such as the
veritable Singapore Airlines (SIA), among others.
An even lesser-known fact is how it scouts
the world for investments, or what investments it
seeks.
Diversification is the key But if hints of the recent acquisition of
banks in China, India, Malaysia and the minority
stakes it has secured in Tiger Airways and JetStar
Asia are anything to go by, then Temasek's
economic interests in the future may well be with
service industries.
On that last line,
there is plenty riding for Temasek, for not only
does it partially own SIA - legendary for its
in-flight service in the world - its stable of
banks and their services are the envy of the
world.
So with proven expertise and
comparative advantages, Temasek's investments can
reasonably be expected to branch out from these
two key strengths.
The company also bought
stakes in China's Minsheng Banking Corp,
Pakistan's NDLC-IFIC Bank Ltd, India's Mahindra
& Mahindra Ltd and Malaysian Plantations Bhd.
Temasek has also announced plans to buy a stake in
the Bank of China and stock in China Construction
Bank.
Something else interesting about it
all is that this is only second time in the
company's 31-year history that such an
announcement of acquisitions and plans has ever
been made.
That move could either be to
demystify itself, or drift away from real and
imagined perceptions that it is opaque in its
business dealings - which in the era of Enron-like
scandals is not only politically correct, but
wise. Apparently, it will continue to make annual
reports public.
Yet another area that
tested Temasek's wisdom was in the way it went
about diversifying its portfolio, weaning itself
from dependence on local companies to foreign
ones.
Ownership in foreign companies rose
to 52% from 49%, reflecting what the company had
termed as "the ebbs and flows of the Singapore
market". Loosely translated, that could mean the
perils of relying too heavily on local ventures,
which in the era of globalization and quick
transfer of funds may just not be economically
viable.
All in, Temasek's portfolio grew
by 15% to $103 billion, up from $90 billion the
year before, as a result of what its chairman
calls as the "buying, selling, swapping,
restructuring or rationalization", in clear
reference to his strategy of diversification.
And how more diversification will play out
depends on the "potential synergies" among Asia's
emerging breed of professionally managed companies
which are eager to expand abroad, according to
Dhanabalan.
With changes to its stable by
the increase or selling of entire portfolios,
including its holdings in Temasek-linked
companies, the company earned total proceeds of $3
billion, as a result of what Keynes would have
called "skill". This represented a net gain of
approximately $1 billion.
On closer
scrutiny, the acquisitions, gains and
diversifications do not represent what is wrong
with Singapore, but with everything that it does
right.
And even despite the gloomy
forecasts of an "uncertain global outlook"
envisaged by its chairman in the short to medium
term - or the dark element that Keynes talked
about - one thing is clear about Temasek: the
future that it is safeguarding for its people does
not look about to be mortgaged.
And if
things proceed at the rosy pace they are going
now; more than Temasek will be kept humming, the
people of Singapore will be as well: it paid out
approximately $769 million in dividends to the
Singapore government.
Jaya
Prakash lectures in journalism at Beacon
School of Technology. He can be reached at
prakruby@pacific.net.sg
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