According to the press release, “We refer to Mak Yuen Teen’s letter “Cut the knot of government ownership of GLCs” (ST, 2 May 00), and thank him for his comments.
GLCs are products of history
2 As Mr Mak has rightly pointed out, the original purpose behind the government’s involvement in business was to accelerate Singapore’s economic development by initiating industrialisation in the early 1960s. At that time, the government moved into areas such as steel making, shiprepair and petrochemicals etc, industries where the private sector did not want to enter and assume all the risks. Temasek Holdings was formed in 1974 to hold and manage all such government investments.
3 In the 1980s, Temasek began a process to divest its investments in companies that could stand on their own and were no longer of national or strategic importance. Our stakes in many companies have been reduced significantly. Some were divested completely. Please see Table 1 for some examples.
4 While we agree that the times have changed and there are no compelling reasons for the Government to hold controlling stakes in the GLCs, we cannot divest our stakes in the GLCs overnight. We have to wait for the right time to get the right price. In the meantime, we will vote our shares where necessary to enhance the value of our investments. We will be abdicating from our role if we step aside and not support proposals which make commercial sense.
Appointment of Board of Directors
5 Contrary to popular belief, Temasek only appoints the number of directors to the listed GLC Boards proportional to its shareholding level. We believe that each Board should have a good mix of directors so that there is a right complement of expertise. Temasek therefore also nominates private sector directors to the GLC Boards.
6 The proportion of directors from the public sector on the Boards of our listed GLCs is actually very small. For an average board size of 9 directors, the average number of public sector directors is two.
GLCs do not receive special privileges
7 While GLCs may be perceived to have better credit risks than non-GLCs when it comes to raising loans, Temasek GLCs are expected to raise the funds they need on commercial terms. Financial institutions that deal with the Temasek GLCs will have to make their independent assessment with no reference to Temasek or Government.
8 Like any shareholder, Temasek expects its companies to be profitable and to give a good rate of return on investment. However, we will divest or liquidate a GLC if it continuously performs poorly, for example, Construction Technology (the company was sold at a loss in 1996) and Micropolis (the company was liquidated in 1997).
GLCs are commercial entities
9 We wish to reiterate that Temasek GLCs operate like any private sector company on a commercial basis. The performance of our GLCs should be judged by the strength of their boards and management, and not on who their shareholders are. We also do not want to see our GLCs compete unfairly with the smaller local firms, and hence have constantly encouraged our GLCs to seek new business opportunities overseas.
10 Finally, Mr Mak quoted that a recent conference in Beijing concluded that “the state is a lousy owner”. However, we would like to point out that every country is unique. What works in one country may not work in another, and vice versa. Our major GLCs have generally performed well and gained regional recognition for their business performance and management. Temasek will ensure that its GLCs will not become complacent, but maintain their competitive edge and become more innovative and entrepreneurial in their outlook.
11 We would like to assure Mr Mak that Temasek constantly reviews its shareholdings in its GLCs to see whether there should be further reduction.
WONG HENG TEW
SENIOR VICE PRESIDENT”
Source: Temasek Holdings Press Release
Gaw Capital Sells Cross Tower Shanghai Building
Hong Kong-based Gaw Capital Partners has agreed to sell the Cross Tower, a 24-storey commercial building in Shanghai, to World Union Investment Management, for 2.66 billion RMB (US$ 402 million). The tower is located in the Huangpu district.
RDIF Portfolio Company Geopharm Plans to Increase Insulin Production
Russia-based Geopharm is a portfolio company of the Russian Direct Investment Fund (RDIF). Geopharm signed a special investment agreement with the City of St. Petersburg, Russia. Geopharm plans to invest more than 3.3 billion rubles in building a complex to meet insulin production demands.
Norway’s KLP to Exclude Companies with Oil Sands Extraction via Revenue Threshold
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The New Zealand Superannuation Fund (NZ Super) has resumed receiving contributions from the New Zealand government in the face of rising obligations as an increasing proportion of the country’s population approaches retirement. According to a statement released by the fund’s managing Board of Guardians, the government plans on investing US$ 5.3 billion into NZ Super between now and June of 2022, with the first payment scheduled for December 15, 2017.
Policymakers believe the resumption of government contributions, which were halted in July of 2009, is expected to ease the burden on the country’s current taxpayers and future generations. Withdrawals from NZ Super are expected to peak in 2078, at which point the fund will be covering 12.8% of New Zealand’s pension obligations. The new wave of contributions will initially be invested in passive, low cost equity and bond investments, according to Catherine Savage, Chair of the Guardians.
Recent Performance & Leadership Change
NZ Super has enjoyed one of its best annual performances since its founding in 2001, with a reported return of 20.7% before tax for a 12-month trailing period ended June 30, 2017, up 5 billion NZD (US$ 3.6 billion) compared to 2016. NZ Super generated 21.85% annual return in its global equities, developed market portfolio, according to its 2017 annual report.
NZ Super faces a changing of leadership in the coming year with the exit of chief executive Adrian Orr, who will leave the Fund officially in March of 2018 to serve a five-year term as Governor of the Reserve Bank of New Zealand. Mr. Orr has earned a spot numerous times in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking over the years, most recently in 2017 at #3.
Card transaction platform iZettle AB has raised another US$ 47 million in Series E funding, this time with new backing from Sweden’s AP4 and early-stage venture capital firm Dawn Capital. Previous investors in the Stockholm-based payments business include American Express, MasterCard, Intel, and Spain’s Santander Group. With US$ 235 million in equity to date, iZettle is quickly approaching an estimated valuation of US$ 1 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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