More Losses at Temasek Holdings

Last week, Reuters reported that Temasek Holding's stake in NIB, a Pakistani bank, was estimated to have suffered a paper loss of around USD 400 million, out of a total of USD 540 million invested initially.  This was indeed bad news.  While I am not against Temasek Holdings per se, it is perhaps time to have a fundamental re-look at its mandate and to see if things can be changed so that the company better support the long-term survival of the country.

Firstly, if not already being practised, geopolitical risk analysis should be incorporated into the investment process.  In the case of Pakistan, that it was on its way to being a failed state was evident for a number of years even if we examine publicly-available information sources. As such, while such 'frontier countries' are suitable for private entities with large risk appetites, it may not be suitable for SWFs that are supposed to be trustees of national wealth.

Secondly, instead of focusing only overseas, could there be a possible shift inwards to look at higher risk investments inside Singapore that will help the country's longer term survival?  What I have in mind is the funding of technology projects that have longer payoff periods, such as converting our national energy infrastructure to one that has a significantly larger component for solar energy, as a way to mitigate the risks arising from dependence on imported natural gas for our electrical power generation.  Imagine how much solar capacity could have been added to our HDB estates if the billions lost in recent years were to be redeployed.

Both GIC and Temasek Holdings are institutions designed to prosper in the previous age where financial asses were on the ascendant.  With the impending approach of Round 2 of the Global Financial Crisis, where there is a significant risk of systemic financial collapse, it is likely that there will be a lot more heartache for Singaporeans arising from our SWF investments overseas. In the coming era, where resource scarcity and climate problems could limit economic growth, I feel that it is high time we prepare for a global environment where control of resources becomes much more important.