January 12, 2010
Singapore’s largest sovereign wealth fund Government Investment
Corporation (GIC) may have lost more than SGD$30 billion dollars of
the country’s reserves in risky overseas investments last year.
GIC was established in 1981 as a “private” company to manage the
reserves of Singapore which is accumulated from years of budget
surpluses due to Singapore’s high national saving rates, especially
in the 1970s.
The Government of Singapore Investment Corporation does not own
the funds it manages but manages them on behalf of their clients:
the Government of Singapore, and the Monetary Authority of
Singapore.
According to the Sovereign Wealth Fund Institute, GIC
has an estimated reserve of USD$247.5 billion dollars or SGD$346.5
billion dollars. (taking USD$1 = SGD$1.40)
Due to the global financial crisis in 2008, GIC’s portfolio
slumped more than 20 per cent in Singapore-dollar terms for that
financial year.
The gigantic losses suffered by GIC and another Singapore
sovereign wealth fund Temasek Holdings has caused some disquiet
among Singaporeans, especially netizens who have been speculating
on the real extent of their losses.
GIC is headed by Singapore’s geriatrician leader Lee Kuan Yew
since its inception in 1981. Temasek Holdings is led by his
daughter-in-law Ho Ching since 2002.
The latest investment loss suffered by GIC in a New York
property project has cast the spotlight once again on its track
record.
Though the exact figures were not revealed, GIC is said to have
invested a total of US$675 million (S$925 million) in Manhattan’s
Stuyvesant Town and Peter Cooper Village.
News of its possible losses surfaced as early as September last
year in an article on the Wall Street Journal, but GIC had declined
to comment on the matter. Neither did the Singapore media report on
it.
On 8 January 2010, Tishman Speyer and BlackRock Inc released an
official statement saying that “they wouldn’t make a full
scheduled debt payment to senior lenders on Stuyvesant Town and
Peter Cooper Village.” (read report
here)
The Temasek Review was the first internet news site to report on
the news, well before any of the newspapers owned by SPH and
Mediacorp (read our article
here)
The matter would have been kept under wraps if not for the wild
speculations and rumors circulating in cyberspace after we
published the news which finally forced Straits Times and Channel
News Asia to report on it two days later.
According to Straits Times, ”GIC has written off
the losses, which reports have estimated to be around US$575
million in debt and US$100 million to US$200 million in equity”
which translates to a loss of between SGD$945 million and SGD$1.085
billion dollars, a mindboggling figure. (USD$1 = SGD$1.4)
Still, the potential $1 billion loss pales in comparison to the
losses it suffered in the fiscal year ended March 2009, – estimated
at around $59 billion Singapore dollars by Wall Street Journal.
(read article
here)
GIC said last September that it has since recovered “more
than half of those losses”.
As no figures were provided, we can only warrant a guess that
this means it has lost between 7 to 9 per cent of its reserves of
SGD$346.5 billion dollars which translates to a loss of between
SGD$24.255 and SGD$31.185 billion dollars, more than the entire
Gross National Product of some Third World countries.
If the amount of money is given to the 3 million or so
Singaporean citizens instead, each of us will expect to receive
between SGD$8,085 and SGD$10,395.
Despite the catastrophic losses, nobody has stepped forward to
accept responsibility for the mistakes. Both Lee and Ho remains in
charge of GIC and Temasek Holdings respectively.
Lee’s ruling party has governed Singapore continuously for 50
years since coming to power in 1959. There is no opposition in
parliament to hold the ruling party accountable to the people.
All institutions of the state are controlled by the ruling party
including grassroots organizations. Lee himself admitted lately
that “all CCs, CCCs and RCs are part of the PAP”.
Singapore’s Law Minister K Shanmugam wrote a lengthy commentary
in the PAP magazine Petir recently that “Singapore, more than
most states, needs an excellent, strong leadership, and its
political structures and systems must allow for effective and
speedy decision-making.”
The GIC fiasco has shown once again why the PAP needs a
political system which allow for “effective and speedy
decision-making.”
In other democracies, a Commission of Inquiry will be called to
investigate the losses and the entire board of directors replaced
leading to a messy transition period. Mass protests will break out
in the streets with the people calling for the government to step
down and fresh elections be held.
In Singapore, life continues as per normal without much of a
hassle. Singapore’s “unique” one-party system allows the PAP to
make the ultimate ”speedy” decision that the best course of
action will be to do nothing since doing anything will not be
in the “strategic” interest of the country (PAP).