S'pore government to remain in critical sectors of economy

S'pore government to remain in critical sectors of economy

Agence France-Presse, Singapore

Singapore will retain control of companies it deems critical to the economy such as airport, seaport and utilities, but is willing to dilute its interest in other sectors, the state investment arm said Wednesday.

Temasek Holdings Ltd. said it will play a more active role in its stable of companies to help them expand beyond the small domestic market, even if its shareholdings are reduced in the process.

Temasek will divest its holdings in companies which have no potential to grow beyond Singapore.

"Government needs to own and control companies for various reasons. These include critical resources -- where ownership of a resource is critical to Singapore's security or economic well- being," it said in its newly unveiled charter. It cited water, power and gas grids as well as the airport and seaport.

The government also needs to have a controlling stake in companies such as public broadcasting, gaming, healthcare, education and housing to enable the state to achieve "specific public policy objectives".

Businesses in these sectors were categorized into a Group A where the government "will continue to hold majority or significant stakes... for as long as there is specific requirement for government ownership or support."

Other Temasek businesses such as port operator PSA Corp. and DBS Bank, which are defined as those with the potential to become regional or global players, were categorized under Group B.

"Temasek is open to Group B companies partnering other companies or shareholders to regionalism or internationalize where it makes strategic or commercial sense," the charter said.

"Temasek is prepared to dilute its stake through the issuance of new shares or mergers or acquisitions in order to support the long-term success of these companies as regional or international players."

Temasek chairman, S. Dhanabalan, would not give a time frame for divestment nor identify specific companies.

"We have no time frame because to tell you the number of companies or which companies and the time frame, will be to actually destroy value for them," he told a news conference.

"We don't want to destabilize the staff, the customers, we don't want to give some advantage to competitors.

"There are many issues that need to be taken into consideration before we divest, but those (companies) that are not relevant as defined ... we will divest at an appropriate time when the market is right," he said.

Temasek executive director Ho Ching, the wife of Deputy Prime Minister Lee Hsien Loong, said that in areas where the government has a "natural monopoly", it was up to the state to decide the extent of its involvement.

She cited the seaport where Prime Minister Goh Chok Tong has directed the Maritime and Port Authority to draw up a competition framework to allow competitors to PSA Corp.

"When such a framework is ready, I think the government will likely see less and less requirement for it to hold a majority or controlling stake. So there are different ways of playing the game and we will have to see what will make sense in each of the cases," Ho said.

"There have been arguments before that the airport should be corporatized or privatized, but this is something where the government has to take a long hard look at its own needs from the total Singapore perspective before it comes to a decision."

Government-linked companies, including those in Temasek's stable, contributed about 13 percent of the gross domestic product as of 1998, the latest reported valuation.

There has been criticism that government influence in the economy was crowding out the private sector and hampering the expansion of domestic companies.