These two investment companies manage Singapore’s reserves, accumulated from years of surpluses, and are our sovereign wealth funds (SWFs). Both ranked inside the top 10 SWFs in the world, the estimated combined holdings of these two companies top out at over $730 billion.
This equates to approximately $210,000 per shareholder, or basically Singaporean citizen. So should citizens demand this money in cash at the next election and do away with our SWFs? Firstly, we’d be suffering great financial losses if we were forcibly selling assets, but we have to understand the roles SWFs play, and in particular Temasek and GIC.
SWFs exist for many reasons, each to serve its government’s purpose. The SWFs of China or Norway may serve entirely different purposes to Singapore’s. SWFs could act as economic weapons, economic stabilizers, economic builders or have other purposes.
Armed with vast resources, China’s SWF may try to flex its economic muscles and buy up critical foreign assets, while Norway’s SWFs invest in safer instruments that are aimed to provide for its population’s pension scheme.
In Singapore, our SWFs invest in a variety of local and overseas companies in search for returns and to protect our nation’s critical assets that have been privatized. Our SWFs hold stakes in exciting businesses such as China’s e-commerce giants Alibaba and Tencent South East Asia’s Lazada, Asia’s largest MMA promoter One Championship and other companies in the banking, tech, life sciences and property sectors around the world. Besides these, they also hold stakes in Singtel, ST Engineering, StarHub, SMRT, Singapore Airlines, SembCorp Industries, Keppel Corp and host of other critical Singaporean companies that the government does not want falling into foreign control, mainly through Temasek Holdings.
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Recently, announced in budget 2015, in view of Singapore’s expected $6.7 billion spending deficit over the next five years, the government has added the expected returns of Temasek Holdings into our budget. In resource-scarce Singapore, our reserves act as a safety net for the country. Providing a pool or excess funds accumulated in the past to provide for potholes in the future. Given these reasons, not many can argue that our money is better managed in individual citizen’s hands.
Finally, Singapore SWFs also act as corporate drivers leading the city’s acclaim as an investment hub and international standing as a financial centre. In addition, they try to spearhead benchmark standards of corporate governance and sustainability and CSR activities in the companies they invest in to solidify their position and also bolster Singapore’s reputation as a test-bed, and hub, for new technology, ideas, and innovation.
However, the question of whether it is managed as well as it could be is a valid one. Over the last 20 years, and notwithstanding this year’s $24 billion decrease in value, Temasek declares that it has delivered a 20-year annualized return of 6%. GIC has returned 6.1% (in terms of US$) per annum over the last 20 years. They are able to do so because they are cash rich and can hold on to investment and even invest more in a period of uncertainty, and also because they are run by professional managers. Money in individual citizen’s hands may not be as well utilized.
The downside to our SWFs, besides not being flushed with cash, is that Singaporeans, even after looking through websites and reports, still mostly have no idea what Temasek Holdings and GIC do with the country’s money. They are just looked upon as giant companies linked to the government that are shrouded in mystery. And as such, most people sit quietly when things are looking good, and complain when they lose value at their year ends. And GIC doesn’t publish their results.
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