|Singaporean government firm may not have received what it thought it was paying for when it acquired what many in Thailand consider tainted assets|
February 6, 2006
ANALYSIS / SHIN CORP SALE
By THITINAN PONGSUDHIRAK
ON the face of it, Temasek Holdings, the Singaporean government's investment arm, has just scored another coup in its international business expansion by acquiring Shin Corp for 73.3 billion baht from the family and relatives of Prime Minister Thaksin Shinawatra.
With a portfolio value of S$3 billion (2.5 trillion baht) and headed by no less than Ho Ching, the wife of Prime Minister Lee Hsien Loong, Temasek is famous for its business savvy on behalf of the island state's government.
Over the past few years, the company has increasingly broadened its operational scope that stretches across Asia and into Europe, North America and Australia. The small fraction of its portfolio invested in Shin Corp was designed to strengthen the company's business prospects in the face of growing global business competition related to Singapore's economic vulnerabilities as a natural resources-poor island state.
Temasek's acquisition of Shin Corp thus appears no different from the expanding international investments of such Thai firms as the Charoen Pokphand Group and Siam Cement Group. This, after all, is an era of globalisation. But just as Singaporeans may have been delighted with their government-owned company's astute investment in Thailand, their Thai counterparts may equally lament what they have lost.
The Shin Corp scandal involving the Shinawatras' possible tax evasion and insider trading has raised questions of morality and business ethics that impinges directly on Temasek and indirectly on the Singaporean government, with far-reaching ramifications for the Thai public interest and, potentially, national security.
What is most problematic in the Temasek-Shin Corp deal is a foreign government-owned company buying up assets, deemed as tainted by the Thai public, that are owned by the family of Thailand's most powerful person who is actively in the highest political office. As such, it is not a routine business transaction. The buyer is not an ordinary individual but ultimately a foreign government. The seller is not an ordinary corporate entity but ultimately a business domain of its prime minister. This is a deal where the buyer should have been mindful of the integrity of the product being offered. Few with respectable moral and ethical standards would want to come into ownership of a tarnished product, no matter how good a bargain it may seem.
In pursuit of its national interest, Singapore has had to manoeuvre its way out of tight spots and regional constraints over the years. In the early 1990s, it lambasted the United States for moral decadence, upholding Asian values as the root of East Asia's economic success.
After the war on terrorism unfolded following the events of Sept, 2001, the island state became a staunch US ally. It once aggressively promoted Asean economic cooperation but bypassed the regional organisation after the 1997 crisis by striking bilateral free trade agreements with partners the world over. Such are the imperatives of national survival, and Singaporean leaders should be commended for steering their tiny country through them.
By the same token, the Singaporean government's overseas investments are fully justified in the name of national interest. Temasek is free to snap up all kinds of Thai businesses. Indeed, Singaporean companies have taken significant stakes in Thai companies in the post-1997 years, ranging from financial services to real estate.
However, Shin Corp assets, particularly Independent Television (iTV) and Shinawatra Satellite (Shin Sat), are different because they have benefitted from what many Thais see as preferential treatment during Prime Minister Thaksin's five-year rule when Shin Corp's stock market value more than quadrupled.
Shin Sat, for example, has reaped privileges on import duties. Thai AirAsia, an airline in the Shin Corp portfolio, has enjoyed reduced landing and parking fees. Advance Info Service, the mobile phone service and the cornerstone of the Shin Corp sale, has benefitted from monopoly power and a controversial conversion of expensive concession fees into cheaper excise taxes. Many Thais doubt whether these businesses would have grown as much if their owning family's patriarch has not been Thailand's prime minister.
Apart from having acquired what the Thai public see as contaminated goods, Temasek may run into trouble particularly with its ownership of iTV and Shin Sat. iTV is a product of a turbulent period in Thai political history. Its genesis traces back to the military-authoritarian period during 1991-92 and the technocrat government of former prime minister Anand Panyarachun. The bloody political catharsis of May 1992 in light of military-enforced news blackout and biased television reportage later provided the impetus for iTV. It is a TV station that was inspired by public broadcasting objectives. It was set up on the blood, sweat and tears of those who participated in the May 1992 uprising in uprooting the military-disguised government.
Of course, iTV eventually ran into financial pitfalls, and was taken over by Shin Corp. But it remained in Thai hands and in the domain of Thai public debates about the role of big business ownership of the media. Now that iTV has foreign owners, it would not be surprising if growing members of the Thai public demand to buy it back and to reclaim the spirit of post-1992 public broadcasting.
Shin Sat came into being in the same period as iTV. It was made possible by the International Telecommunication Union (ITU), an international regulatory agency, which granted operating rights to Thailand as a country due to its national satellite project. As a result, the satellite frequency of Shin Sat does not belong to the company per se but to Thailand. Shin Sat only has the right to use the frequency based on a concessionary agreement. Now that Shin Sat's owner is not Thai, the Thai public may be able to reclaim the frequency which has military and intelligence applications, while Temasek can certainly keep the satellites. Thailand may now have the option of developing its own satellite, public or private, to occupy the frequency originally granted to the country by the ITU.
Having acquired what appear to be tainted assets, Temasek may soon face a host of murky issues. Its due diligence may have underestimated these controversies and longer-term liabilities. Perhaps Temasek was overconfident in its ability to weather the political fallout and legal conundrum. Perhaps Mr Thaksin and his family oversold Shin Corp to the Singaporean government's investment arm. As Thailand's political temperatures continue to rise after the Temasek-Shin Corp deal, the Singaporean company also has become an unwitting player in contentious Thai politics. It behoves Temasek and the Singaporean government's bilateral interests with Thailand to address these controversies by clarifying their intentions and plans for what they have just bought. Passivity and silence will only add fuel to the fire.
Thitinan Pongsudhirak is assistant professor of International Political Economy with the Department of International Relations, Faculty of Political Science, Chulalongkorn University.