What is it about one of Asia’s most active telecom investors, Temasek Holdings of Singapore, that seems to inspire such vicious reactions in people?

And why is it that Temasek seems so tone-deaf to its critics?

The Singapore Finance Ministry-owned Temasek has an amazing penchant for getting into trouble. The obvious example is its early 2006 purchase of Thailand’s Shin Corporation in which it now holds a 42% stake via Aspen Holdings. This column lacks the space to go into details except to say that this was a key milestone in the timeline that led to the eventual ouster of the seller from the prime ministership as a result of a military coup and a continuing telecom policy that seems at pains to minimise any reforms that might advantage Shin properties.

It must have been quite galling for Shin to find themselves accused of spying on Thailand’s leaders on behalf of Singapore’s government, as was charged by the coup leader General Sonthi. Also for Temasek CEO Ho Ching to observe Thai protestors burning effigies of her and her husband, Singapore PM Lee Hsien Loong.

In Indonesia, Temasek’s ownership of stakes in the two major cellular providers via separate entities – SingTel and Singapore Technologies Telemedia – has also attracted critics, with the country’s anti-trust agency pursuing a formal investigation into the possibility of price collusion between the two. There are arguments on both sides here and on the surface it appears no laws have been broken, but the fact remains that Indonesia does have unusually high mobile tariffs for such a low income and apparently competitive market.

OPTUS CONTROVERSY: Temasek-linked SingTel Optus has also seen its fair share of bad publicity, this time for allegedly getting too close to the Australian government and winning a A$950m rural network grant in controversial circumstances. Although the grant award was positioned as a tender, losing bidders charged that Optus’ bid had the inside running from early on and that only it was made aware of an expansion of funding that allowed it to reformulate its bid. The grant has attracted criticisms from the Australian parliamentary opposition, currently poised to sweep into office in months if polls are any guide, and rival Telstra, who is taking the whole affair to a federal court this week to find out exactly how Optus was determined to be the winner.

Temasek-linked Shin even managed to earn itself a public rebuke from the typically reclusive Laos government recently. Laos complained that Shin hadn’t bothered to consult with it on an ownership revamp of a joint venture between Shin and the Lao Government that effectively introduced a new foreign shareholder.

At the very least, Temasek’s telecom holdings have public relations problems, and when these invite regulatory, legal and political responses of the types outlined here one could definitely say that these are not just issues of perception and presentation but ones that directly strike the bottom line. But all indications suggest that Temasek, and more broadly, the Singapore government are tone deaf to these issues and prefer to consign them to the “trade barrier” basket.

For example, Singapore’s prime minister was quoted earlier this week as implying that Temasek’s issues stemmed from a growing tide of protectionism across the region and the world.

According to Forbes’ website he said “sovereign wealth funds (such as Temasek) are particularly under the spotlight as calls for protectionist measures mount in reaction to the unequal benefits of globalization.”

Forbes went on: critics often cite national security as a concern and demand restrictive rules on certain types of foreign investment as a remedy, he said. “Protectionist policies whether for trade or investments will not make things better,” he was quoted widely in Singapore’s press on Monday as saying. “They will choke off growth.”

Of course, he’s, in essence, correct but if he thinks Temasek’s problems stem from opposition to free trade he has misread the reality of what is happening. The criticisms of Temasek-linked companies stem from a perception that they have benefited from a tilted playing field in their favour, not that the overall rules are badly weighted: for example, look at all the baggage of tax evasion, license non-compliance and insufficient disclosure that has dogged Shin Corporation, likewise the charges of price collusion in Indonesia or the suggestions of less-than-rigorous tender processes in Australia.

Temasek isn’t some innocent victim of protectionism, it is indeed a very powerful, well-connected and influential government-owned investment agency that has made deliberate decisions to become involved in deals where any reasonable observer would predict a political backlash, or as Lee puts it, come under “ a spotlight.”

WHAT DID IT EXPECT? Did Temasek think that when it bought Shin from a prime minister’s family that had been dogged by charges of conflict-of-interest for years that this would not be an ongoing issue? Likewise did Optus really think that its win of a rural grant – an overtly electoral act designed to win votes- would be uncontroversial in that nation’s highly charged political and telecom environment?

Temasek likes to point to its corporate governance and disclosure policies, which are good by the standards of state investment agencies, as evidence of why it is has been unfairly treated. But this response is not enough. The agency needs to pro-actively go out and disavow its depiction as a kind of Templeton-meets-Stasi, however unfair, that does the rounds of its critics. And maybe very publicly eat some humble pie.

To date, Temasek delegates much of this function to its portfolio companies, which has done it little good – for example, in my experience, SingTel Group PR is the surliest and least pro-active of the scores of large telecom operators I deal with, notwithstanding the fact that magazines I used to edit handed them best Asian operator awards during my tenure!

And Temasek’s own efforts sometimes border on farce: 18 months ago it accidentally sent a confidential list of 59 stock official replies to journalists that were actually intended to media train its own executives. Sample response: “Whether in investments or divestments, we are mindful that there can be social or political sensitivities. We will do our best to address the various stakeholder concerns where we can, and mitigate these risks appropriately.”

One line of thought I have heard is that despite the multinational make-up of Temasek’s 300 staff and the senior managers of its telco units, the culture of the place simply isn’t worldly enough. Hence its repeated stumbles into disaster after disaster. Maybe so. But at some point it needs to circuit-break its pattern or face erosion of its telecoms portfolio value.

by Grahame Lynch

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