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SCMP Reporter

THE DUST HAS now largely settled since the unveiling of a long-awaited charter for the Singapore government's main investment arm went off with a whimper instead of the expected bang last week.

While the three-page document from Temasek Holdings spelled out that little of substance will change, many foreign observers and even the local press were primed for something more dramatic.

'Investors hoping for either a rapid and substantial divestment in some of the government-linked companies, or hoping the government-linked sector will become more 'return-focused' will be disappointed,' said Morgan Stanley.

The mismatch between the reality of policy continuity from the group that controls 13 per cent of the city-state's economy and widespread expectations of a break with the past is certainly worthy of note.

Singapore policymakers pride themselves on not sending the markets (or voters) wrong or misleading signals, so how could the parties have fallen so far out of step?

The answer appears to lie in some of the verbal images conjured up by Finance Minister Lee Hsien Loong and Tharman Shanmugaratnam, Senior Minister of State for Trade and Industry, in recent months.

These were then reinforced by a personnel shake-up at the top level of Temasek; the circulation of a mystery document that looked at the government's business role; and recommendations from a government subcommittee.

First, what did the charter actually say? In summary the message was 'steady as she goes'. Government-linked firms were sorted into those deemed strategically essential (group A) and those which could be pushed to expand abroad (group B). Both sets would be cultivated, not divested, as many had led themselves to believe.

Temasek chairman S. Dhanabalan said there was a willingness to dilute Temasek holdings to support major deals to expand abroad, but people had heard that already.

To underline the authorities' determination that the charter would not be seen to break new ground, Danielle Yew, the ministry of finance's investment director, wrote to the press. The document 'does not represent a basic change in policy', Ms Yew said.

So why did some people think that it might have done? First, when Mr Lee outlined the government's push to 'remake' the recession-hit economy in December by forming an Economic Review Committee, he invoked two arch free-marketeers.

'If you look at Margaret Thatcher in Britain or Ronald Reagan in America, it was a long process before they got the country on to a new path,' he said.

If these were the role models, what could Singapore - and Temasek - expect? Shortly afterwards, Mr Shanmugaratnam - a key player in the committee - delivered a widely reported speech on 'moving from a managed to an entrepreneurial economy'.

'We have to create an environment in which individuals and firms take their own chances and succeed on the strength of their capabilities or efforts, rather than on government direction or subsidies,' he said.

Such comments - although scattered - appeared to point to a preference in government circles for shifting tack, with a smaller Temasek stable.

In late May, Temasek announced that Ho Ching, the former head of defence contractor Singapore Technologies, had been made an executive director. The remit of one of the country's most powerful women - she is married to Mr Lee - was 'rationalisation and consolidation of its shareholdings', Temasek said.

At the end of that month there was another apparent hint as a subcommittee of the Economic Review Committee issued recommendations about entrepreneurship. Although not official policy, one of its conclusions noted that 'it is private enterprise not the government that is most knowledgeable about . . . market trends and technologies'.

When Ms Ho held her first briefing last month, the headlines the next day read: 'Temasek may cull some firms, push others to expand abroad.' All the talk was of 'moving from being a passive shareholder'.

Again, expectations may have nudged higher.

And while all this was going on, Singaporeans were digesting a curious online document that had been circulating for several months entitled 'Why it might be difficult for the government to withdraw from business'. Containing reams of information about civil servants and military officers who served on the boards of Temasek companies, it argued that divestment would be a tricky task even if were policy.

That the author - a Tan Boon Seng - could not be traced, set tongues wagging harder.

All these small shots made a powerful cocktail. And so when Mr Dhanabalan and Ms Ho said last week there would be no great sale of Singaporean state assets after all, and that this had never been on the cards, you could almost hear the sighs of disbelief.



Charter reality hard to fathom for a Singapore seeking change