This has been a great year for Singapore. This little city-state of 4.5 million people is making its economic presence felt across continents.
In India,Temasek Holdings, the Singapore
government’s investment arm, has emerged as the largest private equity investor in
terms of investments announced this year with about $2 billion worth of deals, reported the Economic Times.
More sexy, of course, are the conquests on Wall Street, in London and Switzerland. Temasek Holdings has just invested $4.4 billion stake in Merrill Lynch, not to be outdone by its sibling Government of Singapore Investment Corp, which invested $9.75 billion in the Swiss banking giant UBS earlier this month.
On Christmas Eve, Temasek also raised its stake in the British bank, Standard Chartered — of which it is already the biggest shareholder — to 18 per cent.
The deals have not attracted the kind of controversy Temasek has faced in Thailand and Indonesia. But the Chinese and the Arabs are also buying Western assets. And some are already expressing misgivings.
Western misgivings
The Economist worried aloud in July when Temasek and China Development Bank took a stake in Barclays. Nobody knows how politically motivated the sovereign funds might become, it said, adding they should be more transparent.
The sovereign funds
raise special questions because the investment decisions are controlled
by governments rather than individuals or corporations, reported the News Journal in Wilmington, Delaware.
Top US government officials say the deals should not spark undue alarm, but do merit scrutiny, reported AFP. "The
most obvious consideration is national security," Robert Kimmitt, the
deputy US Treasury secretary, wrote in the latest edition of Foreign
Affairs.
But the West has nothing to fear, says Anders Aslund in Foreign Policy, expressing a contrarian view so remarkable it bears quoting.
In truth, such funds are nothing for Americans or Europeans to fear.
If anyone should worry about them, it’s the people whose governments
are amassing them. That’s because governments tend to be terrible at
managing money…
That’s not true of the Singapore government which has been an excellent economic manager, as evident from the booming economy, but let’s hear what Aslund has to say:
The motives of the funds vary, and they don’t always make sense.
Consider Abu Dhabi and Kuwait, which wanted to save their oil endowment
for future generations, an admirable goal. But today these two
bureaucratised emirates look like poor cousins in comparison with
freewheeling Dubai, which has much less oil. Because the rulers of Abu
Dhabi and Kuwait centralized their nations’ wealth in the hands of the
state, their state sectors stifled their economies. Abu Dhabi’s fund
may be impressive, but the entrepreneurial emir of Dubai has done a far
better job of putting sustainable wealth in the hands of his citizens.
Aslund has a few things to say about Singapore too. I won’t go into that because I don’t think he is right. Overall, this is what he has to say:
The only democratic
country with a large sovereign wealth fund is Norway. Since the
Norwegian fund was established in 1990, every incumbent government has
lost elections because the opposition has promised all kinds of popular
expenditures from the abundant fund. Democratically, it is difficult to
defend an excessive public reserve fund.
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