By Leong Sze Hian
GIC name change?
There has been quite a bit of chatter on the internet, and some people have also been asking me about the name change of the Government Investment Corporation (GIC).
The most common question seems to be – what does it mean? What is the significance of the name change?
I refer to the article “Govt of Singapore Investment Corp changes legal name to GIC Pte Ltd” (Straits Times, Jul 23).
It states that “The Government of Singapore Investment Corporation has officially changed its legal name to GIC Private Limited, the investment company said on Tuesday.
This “formalises the widely-used brand name of ‘GIC’ in the global investment community and markets that GIC operates in”, it said in a statement.
“The operations of the company remain unchanged and the name change does not affect the identity of the company or its rights or obligations,” the company added.”
Why change a trusted established brand name after 32 years?
So, as many Singaporeans may be asking – why change the name after 32 years?
Was this name change debated in Parliament?
Allow me to use an analogy. Let’s say you are “Google” or “Apple” which are amongst the best known and trusted brands in the world – and it takes decades to build a brand – would you change your name to “GG” or “AP”?
Can you imagine the Bank of England changing its name to “BOE Pte Ltd”?
So, in my view, after a while into the distant future, people who deal with GIC Pte Ltd, and arguably Singaporeans too, may not even realise that the company has got anything to do with the Government of Singapore.
Is that good, bad, neutral? I leave it to you to decide.
When become “private limited company”?
But actually what may be a more pertinent question may be when did the GIC become a private limited company?
Other countries’ SWF got become “private limited company”?
Are there any Sovereign Wealth Funds in the world or entities that manage a country’s reserves and assets that are private limited companies?
So, what are the implications of “a private limited company”?
Well, as I understand it, GIC Pte Ltd and Temasek may fall under the definition of an “exempt private company”.
And what does ACRA say about such companies?
- “What is an Exempt Private Company, (EPC)?
An Exempt Private Company (EPC) is a private company which has at most 20 shareholders. No corporation holds (directly or indirectly) any beneficial interest in the EPC’s shares. It can also be a company the Minister has gazetted as an EPC (see section 4(1) of the Companies Act).
Is an EPC required to file Annual Return?
An EPC is required to file Annual Return via BizFile. If the EPC is insolvent (i.e. unable to meet its debts when they fall due), it has to lodge the financial accounts with the Registrar. However, if the EPC is solvent (i.e. able to meet its debts when they fall due), it has to complete an online declaration of solvency instead.”
Extent of public disclosure?
You will note that such companies do not need to lodge financial accounts.
In layman terms, what I think it means is that there is no legal obligation to disclose its financial accounts and statements, to the extent and to be publicly available like other companies.
In other words, GIC Pte Ltd and Temasek can choose to disclose whatever it likes – kind of like as little or as much as it likes.
In this connection, Temasek has written to the media in the past that it is providing more information than it is required to.
CPF funds to GIC or Temasek?
Whilst we are on the subject of GIC Pte Ltd, let’s examine an interesting question that has often been asked – Has CPF funds ever been given to GIC or Temasek?
According to the South China Morning post article “Lion City runs out of excuses for secrecy“ (Jun 6, 2001)
“Last week, Senior Minister Lee was at pains to stress that GIC fund managers did not manage CPF funds. That surprised academics in the field, who have long assumed CPF funds and fiscal reserves are essentially interchangeable because both are invested in government-linked companies and schemes. The point is the strategic fog maintained around economic data makes it impossible to verify such statements and, more importantly, to monitor the Government’s performance record.”
According to the GIC’s web site:
The short answer is that GIC manages the Government’s reserves, but as to how the funds from CPF monies flow into reserves which could then be managed by either MAS, GIC or Temasek, this is not made explicit to us. What we do know from public sources: Singaporeans’ CPF funds are invested in bonds called Special Singapore Government Securities (SSGS) which are fully guaranteed by the Government. These are non-marketable floating rate bonds issued specifically to the CPF Board. These bonds earn for the CPF Board a coupon rate that is pegged to CPF interest rates that members receive. Under the Protection of Reserves Framework in the Singapore Constitution of the Republic of Singapore, the Singapore Government cannot spend any monies raised from Government borrowings. All the proceeds from the Government’s borrowing are therefore invested.”
Even GIC doesn’t know?
So, what does the above mean?
That the GIC itself does not even know whether it has gotten CPF funds?
From Temasek’s web site:
“Does Temasek manage Central Provident Fund (CPF) savings or Singapore’s foreign reserves?
Temasek does not manage any CPF savings – these are managed by the Board of the Central Provident Fund, the Government surpluses, nor does it manage Singapore’s Official Foreign Reserves, which are managed by the Monetary Authority of Singapore.”
Replies in Parliament that never answer the question?
During the last financial crisis in 2008/9, despite questions in Parliament on the quantum of our Sovereign Wealth Fund losses – the questions were never answered.
According to the article “Temasek Holdings has made substantial contributions to benefit Singapore” (Channel NewsAsia, Dec 5)
“He (Temasek Chairman Lim Boon Heng) added that while the Singapore government is Temasek’s sole shareholder, it does not interfere with the company’s investment, divestment or day-to-day business decisions.
And that freedom from shareholder or political interference is not something Temasek takes for granted.”
Disclosure of returns?
Since we are on the subject of disclosure and Parliamentary oversight, you may like to read the following which I wrote earlier this year:
[spacer style="1" icon="none"]
GIC: Some real, some nominal, no S$ returns?
By Leong Sze Hian
4% real returns last 20 years?
I refer to the article “GIC reports steady 4% real returns” (Straits Times, Aug 2).
Stopped reporting in both S$ & US$ since 2009?
According to the GIC annual report, “The nominal rates of return have been reported in USD terms since our 2009 report as the USD is the most common currency base for publishing global investment returns that allows for easy comparison.” (“Easy comparison” for Singaporeans also?)
US$ only to avoid confusion?
In this connection, last year – in a Parliamentary reply to NCMP Mrs Lina Chiam – the media reported that “Minister of State for Finance Josephine Teo explained that the GIC stopped publishing its nominal returns expressed in Singapore dollars three years ago, to avoid confusion when comparisons are made with other fund managers or global indices.
Its annual reports include the nominal return in US dollars as that is the commonly expressed basis internationally for comparisons of investment returns achieved by global investment funds.
Elaborating on the problem of confusion, Mrs Teo said: “Indeed, in previous years, we found that some readers (of GIC’s annual reports) had compared GIC’s returns in Singapore dollars with the returns of global market indices in US dollars.””
2.55% real return in US$?
MAS annual average on the SGD USD conversion rate from 1993 to 2013
As GIC’s real annualised rate of return was 4.0 per cent in US$ for the last 20 years, with the US$/S$ exchange rate (Monetary Authority of Singapore’s (MAS) web site) declining from 1.6453 from 26 March 1993 to 1.2436 on 28 March 2013, I estimate that the real annualised rate of return in S$ was only about 2.55 per cent.
I believe it may be quite difficult to find any fund manager in Singapore managing funds for Singaporeans to deliver 2.55 per cent real annualised returns in S$, for the last 20 years.
Minus 3.46% real return in S$?
With regard to the nominal annualised rate of return of 2.6 per cent which is lower than last year’s report’s 3.4 per cent in US$ for the last five years, with the US$/S$ exchange rate declining from 1.3799 on 31 March 2008 to 1.2436 on 28 March 2013, I estimate the nominal annualised rate of return in S$ to be about only 0.49 per cent.
After adjusting for annualised inflation in Singapore of about 3.95 per cent from 2007 to 2012 , I estimate the real annualised rate of return in S$ to be about minus 3.46 per cent.
Also, why is it that the GIC’s annual report can give the real annualised return in US$ for 20 years, but not for 5 or 10 years? Only the nominal annualised returns are given for 5 and 10 years.
“More or less” confusion?
If my computed estimates above are correct, I wonder whether Singaporeans are now “more confused” or “less confused” by the decision not to disclose the GIC’s returns in S$ too?
Why would continuing to disclose returns in both US$ and S$, like in the past, be “confusing”?
Do you see any logic in this?
Clarity and transparency?
Giving the returns in US$ and S$ may instead give more clarity and transparency to the performance of the people’s reserves.
Confusing for GIC, but not for Temasek?
If indeed disclosing GIC’s returns in S$ too is “confusing”, then why does Temasek disclose its returns in S$?
NCMP Mrs Lina Chiam may have to ask again?
Perhaps NCMP Mrs Lina Chiam may have to ask a similar question again this year too. And hopefully this time round, the Parliamentary reply will also give the return in S$, instead of avoiding NCMP Lina Chiam’s question on the GIC’s return in S$ altogether, like in the previous year?
Finally, surely, answering an MP’s question in Parliament, by giving the return in Singapore dollars, can’t be deemed to be confusing to all the Members in Parliament too! (even if we concede to the argument that it is confusing for Singaporeans!)
Reference: “GIC: Distinquish between “transparency” and “accountability”?” (Feb 24, 2012)