May 25, 2007

I want to be just like Temasek

This article in the Times Online website points out China's state investment fund looking up to Temasek as a role model for its investment decisions. Looking at Temasek's investment track record, one cannot help but be skeptical of their returns in the long run.

When the Chinese government wants to learn how to invest like Ho Ching, and the China-man on the street is selling his house and withdrawing his life-savings to invest in the stock market, it's not hard to imagine why Greenspan and Lee Kah Shing are warning of an imminent crash for the China stock markets. I'd get out in a hurry, personally.

Fund will avoid touchy deals as it pursues big returns
Jane Macartney in Beijing

China’s $200 billion (£102 billion) state investment fund will avoid politically sensitive acquisitions in its search for higher returns on its vast foreign currency reserves.

The fledgeling state investment company revealed that it had agreed to pay $3 billion for a 9.9 per cent stake in Blackstone Group, the private equity fund, when it makes an initial public offering next month.

The deal brings together a communist government sitting atop the world’s largest stash of currency reserves – $1.2 trillion – and a New York-based fund that is synonymous with capitalism.

China is eager to avoid the political backlash that forced CNOOC, the state-owned oil
exploration firm, to scrap a takeover bid for Unocal, a Californian rival, in

Jessie Wang, a senior government investment official who signed
the agreement with Blackstone, said that the new company would steer clear of
sensitive deals. He said: “My personal understanding is that the investments
basically will be portfolio investments and will be purely financial
investments, not a kind of M&A control-type of thing.”

Steve Schwarzman, a co-founder of Blackstone, said yesterday that he expected the
Chinese fund to repeat its move into private equity. He said: “It should be, or
will be, part of a trend. Blackstone is the first, but, over time, I would suspect there would be others.”

However, under the terms of the agreement with Blackstone, the Chinese fund is barred from giving money to any other private equity firm for one year. China, which parks most of its reserves in safe, low-yielding dollar bonds, is desperate to increase its returns. The Chinese have given up any rights to vote as part of the Blackstone deal and this could be a feature of future investments.

Another clue to the fund’s investment philosophy is that China has declared Temasek, the state-owned Singaporean asset manager, to be a role model. Temasek controls Singapore Airlines, but it also has a broad Asian portfolio that encompasses Chinese banks and Thai telecommunications companies.

The trick for China as it hunts for deals will be to be as stealthy and decisive as it was in hooking up with Blackstone. The consensus-based politics of Beijing is not a recipe for success as a fund manager, yet Mr Schwarzman said that he had been impressed. It was Beijing, not Blackstone, that had suggested taking an IPO stake and, after the
initial proposal was made, a deal was clinched within three weeks.

Mr Schwarzman said: “I doubt that there is any government in the world that could have done it more efficiently or more professionally.”

May 14, 2007

How long more can the Starlight still shine brightly?

The crash of the Taiwanese F-5F Tiger fighter jet that killed 2 SAF "Starlight" personnel last Saturday, was an unfortunate metaphor for the strained relationship between Singapore and Taiwan in recent years, and also the issue of the Starlight presence in Taiwan.

Being a Singaporean working in Taiwan for the past 6 years, I'm naturally sensitive to such events, not because I'm worried of being spat by the locals with a mouthful of betel-nut juice, but believe it or not (coming from a so-called "quitter"), about the image of Singapore in the eyes of the Taiwanese.

An article by a China Times editor expresses her views on the crash, and summarizes quite succinctly the history of how Starlight came to being, and how relations soured to its present state. Here is my translation, any mistakes all my own.

The original article can be viewed here.

How long more can the Starlight still shine brightly?

by Sheena Chang (China Times)

The Taiwanese military fighter accident that killed two Singapore servicemen who were training in Taiwan, has forced Singapore to officially acknowledge for the first time the existence of the "Starlight program". This accident may not necessarily affect the continued existence of the "Starlight program", but Taiwan-Singapore relations, which has gone increasingly downhill these past few years, is really the question worth noting.

Due to Singapore's limited geographical size, there is no space large enough for military exercises, hence the need for co-operation with allied countries for training agreements. Thanks to the close friendship between former Singapore Prime Minister Lee Kuan Yew and the late Taiwan President Chiang Ching-kuo, both countries signed the agreement for the Starlight program in 1975, after which Singapore began to dispatch servicemen to Taiwan for training.

Military training agreements are different from normal bilateral cooperation, because national defense is the lifeline of a country's survival, and troop equipment, engagement plans and operational capability are of the utmost national security and obviously cannot be leaked. Allowing foreign troops to train with local forces exposes much of the internal workings to them, and this cannot be achieved without a certain degree of mutual trust. As a result, the Starlight program remains the best testimony of the relationship between Taiwan and Singapore.

Bilateral ties were really quite good in the past, as Lee Kuan Yew enjoyed the scenery of the Sun Moon Lake and A-Li Shan, and visited Taiwan on vacation every year, often in the company of Chiang Ching-kuo. After observing Lee Kuan Yew chatting with the locals in Hokkien, Chiang lamented his own inability to talk to converse with the locals, with Lee even exclaiming "I'm also a Taiwanese".

After Lee Teng-hui succeeded as president, he originally continued friendly relations with Lee Kuan Yew, making his first official foreign visit to Singapore. But due to Lee Teng-hui's criticism of Lee Kuan Yew's "Asian-style democracy" , leaving Lee Kuan Yew frothing at the mouth, the rift between the two Lees being to widen from that point on, with Lee Kuan Yew not returning to Taiwan on vacation for several years. But from a wider perspective, the two Lees represented two different models of Confucian cultural development. Lee Teng-hui professed to have founded democratic reform Taiwan, and Lee Kuan Yew's Singapore is the successful example of the patriarchal model. Lee Teng-hui felt that the significance of his democratic achievements surpassed that of Lee Kuan Yew, but of course Lee Kuan Yew begged to differ.

Once the seeds of discord were sown, ties were difficult to mend, especially when the "two Lees" were known for their temperament and pride. Afterwards to make matters worse, Lee Teng-hui's visit to the US ignited cross-strait tensions with China, which Lee Kuan Yew criticized repeatedly on Taiwan's actions. Of course, Lee Teng-hui was not known for accepting such face-on criticism, and this led to a further deterioration of ties.

The foreign media eloquently described Lee Kuan Yew as "a fish too big for its pond". Indeed, to a big fish like Lee Kuan Yew, a small pond like Singapore was not big enough to contain his political aspirations. Hence he hoped to play a bigger role in the international arena, including cross-strait relations and China's development.

He focused on the practical side, and felt that China's rise cannot be taken lightly, and cross-straits peace must be maintained. As a result, he disagreed with Taiwan taking a radical stance and standing for independence in defiance of the Chinese Communist Party, which obviously fell on deaf ears with the Taiwanese government.

The national interests of Taiwan and Singapore are certainly different, and it is difficult for the outsider to understand the long-term suppression of pride, the indignity and fear of security constantly being threatened. But Taiwan's reading and handling of the international situation is still at odds with international society, causing the country to distance itself with the rest of the world.

But Taiwan is still a very suitable military training location, and therefore although Singapore continues to sign training agreements with other countries, Taiwan-Singapore ties continue to turn cold, but the Starlight program still manages to hang on. The thing is, it may be quite impossible for the time being for Taiwan and Singapore to recover their former close relationship.