Letter from.. Singapore

Jake Lloyd-Smith reports from Singapore

Since Stamford Raffles mounted a muddy riverbank in 1819, Singapore has earned its living by attracting - and profiting from - a flow of money, people and ideas. Over the 19th and 20th centuries, merchants and companies sent their investments, traders sent their goods, and immigrants sent themselves. But now the small, but successful, south-east Asian city-state is trying something new - sending its own money abroad in search of lucrative business opportunities. And the chief architect of what has become a dramatic search on the international stage is Temasek Holdings.

Just a couple of years ago the finance ministry investment unit was little known, even if some of its homegrown companies like Singapore Airlines and DBS Bank were familiar. But these days Temasek’s dealings have become hard to avoid, often dominating the pages of newspapers worldwide as it plays out its multi-billion dollar hand. And two fresh deals so far this year have brought global attention.

In January, a Temasek-led group shelled out US$1.7bn to buy a 49% stake in Thailand’s Shin Corp from the family of Prime Minister Thaksin Shinawatra. The move for the telecoms-to-aviation group was Thailand’s largest takeover to date. In Europe, meanwhile, Temasek’s wholly-owned ports unit, PSA Corp, faced off against a Dubai rival for control of Britain’s P&O, the venerable shipping and ports company whose roots are almost as old as Singapore’s. Although PSA was eventually outgunned in that fight last month, it will likely now be looking to make its mark elsewhere.

The high-stakes push abroad is borne of a realisation that there’s only so much that the Government can do to ensure Singapore’s continued prosperity by looking inward. After all, four million people - a quarter of whom are foreigners - is not a big market by any standard. So Temasek and its affiliates are now striking out in all directions. Planners at the parent group say that they ultimately want just a third of the total S$103bn portfolio in Singapore, a third elsewhere in Asia and a final third looking for growth in the OECD, the 30-strong grouping of the world’s richest economies. Right now, close to half of Temasek’s assets remain at home, so that means there’s plenty of realignment and plenty more deals to come.

The recent investment scorecard has been as frenetic as it has been diverse. Deals have included seizing a 6% stake in Thailand’s leading hospital, picking up a minor holding in a leading Chinese car maker, and accumulating bank stakes in China, Indonesia, Malaysia, South Korea and India. Temasek managers have also been keen on mobile phone companies in Russia, fuel-cell development in collaboration with a British engineering group and a struggling Chinese oil trader. The guiding principles for this push include looking to buy into Asia’s growth, especially the burgeoning middle class, and trying to hone what Temasek calls “emerging champions”.

The intellectual and managerial power behind the ambitious push is Madam Ho Ching, Temasek’s executive director since 2002. The 50-something year-old initially trained as an electrical engineer and then spent spells as a civil servant and at Singapore Technologies, a defence-related group. Her shift to Temasek raised eyebrows as she’s married to Lee Hsien Loong, who at that time was Deputy Prime Minister and now has the country’s top job. Officials have repeatedly said these family ties played no role in her elevation and that, in the words of Temasek chairman S Dhanabalan, Ho was simply the best person for the job.

As the recent deal-making by Ho and her lieutenants underscores, that mammoth job obviously remains a work-in-progress. The outcome will go a long way to determining whether Singapore thrives or falls by the wayside in the decades ahead.

Jake Lloyd-Smith is a freelance journalist based in Singapore. He works regularly for the Financial Times, TIME Magazine and the London Evening Standard.