[Kabar-indonesia] NYT: Singapore Telecom Deal Roused Thais [+BT]

[JoyoNews at aol.com]

also: BT: Temasek may have overstepped laws in Shin deal: Thai ministry 
[Its stake could have exceeded foreign ownership limits]

excerpt from NYT: Many Indonesians, for example, resent Temasek for what they 
say is excessive control of Indonesia's cellular industry. ST Telemedia and 
SingTel control Indonesia's two leading operators. "It galvanizes the ill 
feeling the public has toward Singapore," an Indonesian legislator, Drajad H. 
Wibowo, said.

The New York Times
Tuesday, October 3, 2006

Telecom Deal by Singapore Roused Thais 

By WAYNE ARNOLD

photo: Thais protested the sale to Temasek Holdings of much 
of the Shin telecommunications conglomerate at the Singapore 
Embassy in Bangkok.Udo Weitz/Bloomberg News

SINGAPORE, Oct. 2 -- Among the many measures of a successful foreign 
investment, helping to set off a coup d'état is definitely not one of them. 

In hindsight, the $1.9 billion purchase of a controlling stake in Thailand's 
dominant telecommunications conglomerate early this year by a group led by the 
Singapore government's investment arm, Temasek Holdings, was less than ideal, 
analysts and people close to the deal say. 

Buying the company, called Shin, provoked nationalist outrage in Thailand. 
Buying it from the family of a prime minister widely accused of corruption, 
moreover, touched off extensive street protests that culminated on Sept. 19 in the 
military ouster of Thaksin Shinawatra as the Thai leader.

The coup has thrust Temasek into unusual focus. Created, owned and overseen 
by the government, it has embarked on an ambitious overseas investment campaign 
that exceeded $13 billion in its latest fiscal year.

And as Singapore struggles to stay ahead of big competitors like China and 
India, Temasek is helping this small city-state hedge its bets by investing in 
them. 

"It's an insurance policy," said Song Seng Wun, regional economist at 
CIMB-G.K. Goh, a brokerage firm in Singapore. "Even if things, knock on wood, didn't 
turn out domestically, they'd still have a hand or fingers in many pies across 
the world."

But the fallout from the Thai investment has underlined the perils of 
investing abroad.

"I don't think anyone perceived there would be such political fallout from 
the deal," said Stephen Bennett, a lawyer with Hunton & Williams in Bangkok who 
advised Temasek on the purchase. "They wouldn't have done it had they known 
this would happen."

On the contrary, Mr. Bennett said, political risk did not even figure into 
negotiations. "It wasn't an open-discussion issue," he said.

Now, Mr. Thaksin is in exile, Temasek has lost roughly $700 million and Thai 
officials, including those from the Ministry of Commerce, are investigating 
whether it was illegal. The company said executives were not available for 
interviews, but issued a statement saying: 

"Temasek remains a long-term investor in Thailand, and we believe that the 
long-term fundamentals of the country remain good. We have complied fully with 
the laws in our investments, and will continue to cooperate fully with the 
M.O.C. as we have always done."

Over all, Temasek's portfolio rose 24 percent in the year ended March 31, to 
a value of $81.2 billion. That made it one of the largest government-owned 
shareholders in the world, according to Thomson Financial. It is the largest 
single foreign investor in China's financial industries, and it has plans to move 
into advanced economies, too, like Europe, Japan and the United States.

Temasek insists that its investments are purely profit-driven. But its 
appetite and ownership have created reservations within some other Asian countries 
that look at Singapore, their small but affluent neighbor, with a mixture of 
respect and resentment. While analysts say the company is not political, they 
also say its investments have a strategic purpose: to increase tiny Singapore's 
place in the global economy. 

"The more you invest in the region," said Garry Rodan, a professor at Murdoch 
University's Asia Research Center in Perth, Australia, "the more capacity you 
have to influence decisions about where people invest."

To some extent, Temasek's frustrations mirror those of other state-owned 
enterprises venturing overseas, like the Chinese oil company Cnooc when it tried 
to buy Unocal. 

But Temasek's push is part of a broader effort by Singapore to hitch itself 
to larger economic wagons. A port city with no natural resources, Singapore 
lured foreign manufacturers after independence in 1965 with low taxes and clean 
government. It also set up companies to build essential infrastructure and in 
1974 established Temasek to oversee them. Temasek's stakes in those 40-odd 
companies now earn it an estimated $2.5 billion in annual dividends. Part of that 
flows to the government; the rest is invested elsewhere. 

When the technology bubble burst in 2000, Singapore was thrown into 
recession, its worst since independence in 1965. Combined with the economic impact of 
the terrorist attacks of September 2001, Temasek's portfolio shrank by almost a 
fifth. 

In mid-2002, it appointed a new executive director to overhaul the company, 
Ho Ching, a Stanford-educated engineer who worked her way up to run a 
military-related conglomerate, Singapore Technologies. Temasek's chairman, S. 
Dhanabalan, said at the time that he had to overcome initial hesitancy about hiring Ms. 
Ho from her husband, Deputy Prime Minister Lee Hsien Loong, son of 
Singapore's senior leader, Lee Kuan Yew. The younger Mr. Lee is now prime minister.

Bankers credit Ms. Ho with imposing investment discipline and global 
expertise, partly by hiring outsiders. These days, 27 percent of Temasek's 250 
employees are foreigners. Ms. Ho also introduced one of her personal preoccupations, 
the BlackBerry wireless e-mail device.

Temasek was already gaining overseas exposure through its Singapore 
subsidiaries. Singapore Telecommunications, or SingTel, bought the Australian cellular 
operator Optus for $7 billion in 2001. Singapore Airlines owns 49 percent of 
Virgin Atlantic. And the port operator PSA International holds stakes in 20 
ports in 11 countries, including 5 in China. 

Economists say that investing abroad enables Temasek to diversify without 
increasing the government's dominance of the Singapore economy. Investing abroad 
also fits Singapore's strategy of building bridges overseas.

Singapore has signed two-party trade agreements with the United States, Japan 
and six other countries.

"Being a small country in the middle of a volatile region, Singapore has 
always wanted to keep everybody engaged," said C. Fred Bergsten, director of the 
Institute for International Economics in Washington. 

Temasek's goal for its portfolio is a three-way split among Singapore, 
developing Asian countries and advanced economies. So far, though, it has been 
concentrating on gaining exposure to Asia's rapidly growing middle class, 
particularly through the region's banks. It has stakes now in banks in India, 
Indonesia, Malaysia, Pakistan, South Korea and Taiwan. 

China is an even bigger target. In September 2005 Temasek paid $1.47 billion 
for a roughly 5 percent stake in the China Construction Bank; it also bought 5 
percent of the Bank of China for $1.5 billion.

In March, Temasek ventured to Europe, buying an 11.5 percent stake, valued at 
$4 billion, in the Standard Chartered Bank of Britain, which makes 
three-quarters of its profit in Asia.

Temasek has refrained from selling strategic domestic assets, saying it would 
do so only when market conditions were right. It still owns 100 percent of 
PSA, most of SingTel and Singapore Airlines. Companies it controls account for 
almost 30 percent of the economy.

Temasek says the government is not involved in its investment decisions. But 
its board is appointed by the finance ministry, which Prime Minister Lee 
leads, subject to approval by Singapore's president. Its chairman, Mr. Dhanabalan, 
is a former foreign minister. One of its two deputy chairmen is a permanent 
secretary in the finance ministry. 

Envy of Singapore's affluence helps fuel suspicion of Temasek, analysts say. 
Singapore has become a haven for the fortunes of Asia's new rich - and not all 
its neighbors are pleased with that.

Many Indonesians, for example, resent Temasek for what they say is excessive 
control of Indonesia's cellular industry. ST Telemedia and SingTel control 
Indonesia's two leading operators. 

"It galvanizes the ill feeling the public has toward Singapore," an 
Indonesian legislator, Drajad H. Wibowo, said.

The Indian government rejected ST Telemedia's bid last year for a stake in 
one of the country's cellular operators because SingTel already owned a stake in 
a larger rival. This year, India blocked Temasek from increasing its stake in 
the Icici Bank of Mumbai because the Government of Singapore Investment 
Corporation, which manages budget surpluses and foreign exchange reserves, already 
held 3 percent.

Temasek has had better luck in the United States. ST Telemedia's purchase in 
2003 of a majority stake in Global Crossing overcame opposition by the 
Pentagon after Singapore's prime minister at the time, Goh Chok Tong, wrote to Vice 
President Dick Cheney.

Washington, though, seemed less sympathetic toward one of its recent partners 
in China. Last year, Temasek and Singapore Airlines took a 49 percent stake 
in a cargo airline with China Great Wall Industry, a satellite launching 
company that since 1991 has been repeatedly sanctioned by the United States in the 
export of missile parts to Iran. 

This August, the Bush administration imposed sanctions on the new carrier, 
Great Wall Airlines, forbidding Boeing and other American companies to do 
business with it. Deprived of technical assistance or parts, the airline was 
grounded.

Singapore Airlines said in a statement last week that Great Wall Airlines 
itself had done nothing wrong and that China Great Wall Industry no longer owns 
any of it.

As for the investment in Shin in Thailand, analysts say that Temasek should 
have been more careful about getting involved. 

Since becoming prime minister in Bangkok in 2001, Mr. Thaksin was repeatedly 
accused of using policies to benefit the company. Even as sale talks were 
under way, rallies against him were drawing tens of thousands of people. 

After buying the 49.6 percent stake with a group of Thai investors, Temasek 
and its partners were obliged to offer to buy the rest, and ended up with a 96 
percent stake. Temasek gained control over Shin, as well as Thailand's leading 
cellular operator, a satellite company and a local television broadcaster.

What outraged Bangkok's middle class, in addition to the sale of vital 
communications to a foreign government, was that the deal was conducted so that the 
prime minister's family avoided paying any income tax on the sale.

Korn Chatikavanij, deputy chief of Thailand's opposition Democrat Party, 
said, "If he saw a loophole that allows someone to do a deal like this and not pay 
any tax, his duty is to close the loophole, not take advantage of it." 

Hundreds of thousands of people took to the streets in Bangkok, with some 
burning posters of Singapore's prime minister, Mr. Lee, and Ms. Ho outside the 
Singapore Embassy.

Investigations into the Shin purchase now center on whether Temasek relied on 
proxies to exceed Thailand's 49 percent foreign shareholding limit on 
telecommunications companies. Temasek denies that any of its Thai partners are 
proxies, saying that it controls only 44 percent of Shin and that Thais control the 
rest.

If the Shin deal is found to be illegal, the buyers could face penalties and 
Shin's licenses could be revoked. The ministry could also force Temasek to 
dispose of shares or to void the sale.

Many analysts predict that with Mr. Thaksin gone, the case will fizzle as 
Thailand's new leaders choose instead to preserve ties with an important 
investor. If they do not, Shin represents such a small part of Temasek's overall 
portfolio, said Anshukant Taneja, an analyst with Standard & Poor's in Singapore, 
that "even if they were to write it off, it doesn't make any material impact on 
their profile."

-------------------------------

Business Times (Singapore)
Tuesday, October 3, 2006

Temasek may have overstepped laws in Shin deal: Thai ministry

Its stake could have exceeded foreign ownership limits

By Siow Li Sen in Singapore and Our Correspondent in Bangkok

TEMASEK Holdings may have overstepped Thai laws on foreign ownership
of companies, says Thailand's Ministry of Commerce. The ministry has
sent the results of an initial probe into the Singapore investment
company's takeover of Shin Corp to the police for further action.

Dusit Uchupongamorn, deputy director of the ministry's Business
Development Department, told reporters in Bangkok yesterday that the
forwarded report could implicate Temasek in violating Thai laws
restricting foreign ownership of a telecoms business to a maximum of
49 per cent.

The investigation centred on Kularb Kaew, a holding company set up as
part of Temasek's US$1.9 billion purchase in January of Shin Corp from
the family of now-deposed Thai prime minister Thaksin Shinawatra.

At the heart of the matter lies the question of whether Kularb Kaew,
which is controlled by a Malaysia-based Thai who was a partner in the
Shin deal, is a Thai company or a Temasek nominee, said a Reuters
report.

'We have found some evidence, especially the way Kularb Kaew
transferred money to buy Shin Corp, which might go against Clause 36
of the Alien Business Law,'' Mr Dusit told reporters.

Public relations company Weber Shandwick yesterday issued a response
on behalf of a Kularb Kaew spokesman after BT asked Temasek for a
comment on the latest development.

'We have not received any formal notification from the (Thai ministry)
regarding their review. We've complied fully with all the laws and
regulations in Thailand and will continue to cooperate fully with the
Thai authorities as we have been doing,'' said the spokesman.

Last week, Temasek managing director Jimmy Phoon said the company
cannot be blamed for the political crisis in Thailand. He said Temasek
complied with all laws and regulations in Thailand when it took over
Shin Corp. Temasek currently holds 41.7 per cent of Shin directly,
through a company called Aspen Holdings, while another 54.6 per cent
is held by Cedar Holdings, a joint venture between Temasek's Cypress
Holdings, Siam Commercial Bank and Kularb Kaew.

'Importantly, the majority shareholder of Cedar is Kularb Kaew, which
owns 45.2 per cent and together with Siam Commercial Bank controls a
majority of Cedar. Kularb Kaew was not a proxy for Temasek,' Mr Phoon
said.

According to data from the Stock Exchange of Thailand, Cedar Holdings
controls 51.98 per cent of the 3.195 billion common shares of Shin
Corp, and Aspen Holdings controls 44.14 per cent.

Yesterday, Mr Dusit was reported to have said that the initial report
by the ministry had indicated that there was sufficient evidence found
to indicate that Temasek might have bought a stake in Shin Corp
through a nominee shareholder. He added that now that the 800-page
report had been forwarded to the police, the ministry would cooperate
as a witness in the case.

The report, whose contents have been leaked to the Thai media, is
understood to go into great detail about the ownership structure of
Kularb Kaew.

Analysts say that if Temasek's direct and indirect stake in Shin Corp
is found to exceed foreign ownership limits, it could restrict the
eligibility of Shin Corp's units for telecom licences and may force
Temasek to reduce its stake in the company.

The say such a move may result in losses to Temasek as the current
share price of Shin Corp is 29 baht per share, a significant decline
from the 49.25 baht they cost Temasek in the first place.

The crown jewel of Shin is Advanced Info Services, Thailand's leading
mobile phone operator.

The speeding up of the process of handing the report comes after Mr
Thaksin's removal by the military on Sept 19. The military junta has
accused Mr Thaksin's Cabinet of corruption and has empowered
anti-graft agencies to investigate allegations against the
administration.

The junta set up a special anti-corruption committee to investigate
controversial government contracts, with the power to freeze assets of
former Cabinet members and their families if it is found that abuse of
power for personal enrichment took place.

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Joyo Indonesia News Service
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