Govt to take 'hands off' approach on state funds: Tharman
Mon, Jan 21, 2008

THE Government will take a 'hands off' approach on investments made by its sovereign wealth funds in banks including Citigroup Inc. amid the subprime meltdown, Finance Minister Tharman Shanmugaratnam said in Parliament on Monday.

The recent multi-billion-dollar investments in ailing global financial institutions were made purely from a commercial standpoint, he told the House.

The government plays no role in how the Government of Singapore Investment Corporation (GIC) and investment firm Temasek Holdings decide their investment policies, said Mr Tharman.

'They make these decisions for commercial reasons based on their own calculations free of any influence from the government,' he told Parliament.

'It is not the government's role to comment on or second guess whether it was timely for GIC and Temasek to make these investments,' he said in response to an MP's question.

He said the government is 'scrupulous in avoiding comment' or influence not only publicly but internally on the individual decisions of Temasek and GIC.

'It does not judge the performance of GIC and Temasek by their individual deals,' Mr Tharman said.

GIC and Temasek are both sovereign wealth funds - a form of government-created investment vehicle which has emerged as a potent force on global financial markets.

With their newfound market muscle, such funds have led to concerns over a lack of transparency and national security in recipient countries.

The two funds made global headlines recently with their investments in global financial houses battered by a US housing slump.

GIC, the custodian of Singapore's massive foreign reserves of more than US$100 billion (S$143 billion), announced last week it would invest US$6.88 billion in US banking giant Citigroup.

That followed its December investment of almost US$10 billion into Swiss bank UBS, while Temasek Holdings committed to injecting US$4.4 billion into US brokerage firm Merrill Lynch.

'These are large investments; there will be downside risks and it's up to GIC and Temasek to assess these risks and decide if they are acceptable,' said Mr Tharman.

'It is important for the government to retain its stance of not assessing Temasek and GIC on individual deals.'

GIC, the government's fund manager, said in July 2006 it earned an average 9.5 per cent annually since its inception in 1981.

Temasek, the state-owned investment company, had a return on investment of more than 18 per cent by market value since its inception in 1974, the company said in its latest annual report.

Financial services rose to 38 per cent of Temasek's assets in the financial year ended March 2007 from 35 per cent a year earlier, the company said in the report released in August.

The company is the single-largest investor in banks such as Standard Chartered Plc and DBS Group Holdings Ltd. -- AFP.


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