Stirring Up Singapore Inc.

A slew of execs pack their bags as Ho rises at Temasek

When Ho Ching took over Temasek Holdings Ltd. in May, Singapore's business community buzzed with speculation about the future of the giant state-owned holding company. Sure, Ho was well-connected--maybe too well: Her father-in-law is Senior Minister Lee Kuan Yew, and her husband is Finance Minister Lee Hsien Loong. But did she have the management chops to run a corporate empire that controls companies with more than $30 billion in annual revenues from activities as diverse as shipbuilding, chipmaking, and zoo ownership? Even Prime Minister Goh Chok Tong, in a May interview with BusinessWeek, admitted that there was "some conflict of interest" in the appointment. But he insisted Ho was the right person to shake up Temasek's 200-plus hugely inefficient corporations.

Well, Singapore Inc. clearly has been shaken. Since June 23, more than a dozen top brass at troubled companies controlled by Temasek have left--including the CEOs of Development Bank of Singapore, Chartered Semiconductor Manufacturing, and ST Assembly Test Services, as well as chairmen, CEOs, and directors at other Temasek companies. The latest: On Aug. 20, Thomas Kloet, CEO of Singapore Exchange Ltd., the manager of the local bourse, announced plans to leave at yearend, four months before his contract expired.

What's going on? Ho, her husband, the prime minister, and almost all the departed executives declined requests for interviews for this story. Temasek released a statement saying it "is not involved in the recent management changes" and said the boards of the companies it controls decide on management issues. Kloet says he's leaving because he has accomplished what he set out to do, and says of Ho: "I'm a big admirer of hers."

Yet few outsiders believe the rash of departures is entirely a coincidence. And at least some of the chief executives who left ran companies that have come under criticism. Yeo Ning Hong, for instance, was granted early retirement as chairman of the Port of Singapore Authority Corp. Over the past year, the PSA indefinitely postponed plans to go public and lost two important clients--Denmark's Maersk Sealand and Taiwan's Evergreen Marine Corp.--to a competing port in neighboring Malaysia.

Then there's Development Bank of Singapore, the island's largest bank. DBS has been in turmoil since 1997 due to overpriced acquisitions of consumer banks in Korea, Hong Kong, and Thailand. The bank is still recovering from a botched merger in 2000 with POSBank that preserved two competing networks of retail branches and ATMs. Philippe Paillart resigned as CEO on June 23 after only 19 months on the job, leaving the bank in the hands of its fourth chief executive in four years.

Among the state-controlled companies that remain untouched thus far is one of the city-state's largest: Singapore Telecommunications. The company's net profits fell by 17% last year. Some investors say SingTel overpaid when it spent $8 billion for the Cable & Wireless Optus cellular network in Australia in April, 2001. Shares of SingTel--which is headed by Ho's brother-in-law, Lee Hsien Yang--have fallen by half since the deal was announced, although they have stabilized of late. Lee Hsien Yang and other SingTel officials declined to comment.

Ho, meanwhile, appears to be shaking things up elsewhere. In recent weeks, long-stalled restructuring schemes have been revived to merge redundant companies inside Temasek as well as spin off noncore assets. Merger plans between Temasek's two colossal shipyards, SembCorp Industries Ltd. and Keppel Corp., appear to be sailing again. Disagreements over pricing that stymied negotiations last year now seem forgotten, say fund managers. Then there's NatSteel Ltd., Temasek's steel mill. CEO Ang Kong Hua is getting encouragement to revive a planned management buyout, with the help of an inexpensive loan from DBS. "If this gets a company off Temasek's back and away from its stewardship, we think it's a great thing for Singapore," says a fund manager in the city-state.

So far, Ho's appointment has done little to help many of the publicly traded companies that Temasek controls: DBS is off by 13% since May, and Chartered Semiconductor has plunged by 48%. "It's still early days yet," says Mark Mobius, who runs Templeton Asset Management Ltd. in Singapore. Nonetheless, Mobius says Temasek, under Ho, is finally making some of the right moves. It looks like this ultimate insider has gotten inside Temasek--and is starting to turn it inside out.

Corrections and Clarifications "Stirring up Singapore Inc." (Asian Business, Sept. 9, 2002) contains certain passages which could be understood to make defamatory allegations concerning the development bank of Singapore Ltd. ("DBS Bank"). These allegations are as follows:

-- That in order to enable Temasek Holdings (Pte) Ltd. ("Temasek Holdings"), a significant shareholder of DBS Bank's parent company DBS Group Holdings Ltd., to get a noncore asset NatSteel Ltd. off its back, DBS Bank was prepared to fund a planned management buyout of NatSteel with an inexpensive loan.

-- That in so acting, DBS Bank improperly favored Temasek Holdings.

-- That DBS Bank had therefore failed to act in the interests of shareholders of DBS Group Holdings.

We never intended to make any such allegations and have no basis to do so. We apologize to DBS Bank and its chairman and board of directors for any misunderstanding.

The article was also incorrect in stating:

-- That DBS Bank had overpaid for a consumer bank in Korea. In fact, DBS Bank did not buy any consumer bank in Korea. BusinessWeek had previously corrected this (Nov. 25, 2002, issue, Asian edition).

The article further stated that DBS Bank's merger with POSBank preserved the two competing networks of retail branches and ATMs. We recognize that DBS's position is that the two networks are complementary rather than competing.

By Michael Shari in Singapore

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