by Brad Bowyer
Extract from this telling article by Reform Party chief, Kenneth Jeyaretnum.
“Temasek’s results were announced on 9 July and they were not a pretty picture. While the Board claimed a 1.5% return for the year to 31 March 2019 this was only after translation into depreciating Singapore dollars. In US$ terms the portfolio lost money, falling almost 2% in value. During that period the S&P 500 rose by over 11% while the MSCI World Index rose nearly 2% over the same period.”
Temasek is vastly underperforming its peers and the global markets and its holdings are getting ever more hidden from public view and we must ask why and what kind of decisions are they making?
Most of us now know about recent the Bayer debacle, whereby Temasek invested nearly $5 Billion in the German drug maker just ahead of its controversial purchase of Monsanto, but few know much about the details or the history of the companies involved and the issues around the buy over.
Not only was the Bayer purchase of Monsanto subject to protracted objections from antitrust lobbyists, environmentalists and farmers it was heavily scrutinised by regulators before finally being approved in Mar/Apr 2018. At that time, although they may not have known how the lawsuits would have turned out, for sure the decision makers at Temasek would also have known they were in existence and of course of the awful track record of both companies involved.
Bayer was formerly the German chemical giant IG Farben, most infamous for providing Mustard Gas in world war 1 and the Zyklon B gas used in Hitler’s Gas chambers during world war 2. It is also the inventor of Heroin and has itself been subject to many lawsuits for medical fraud and selling contaminated drugs amongst others, some of which are ongoing.
Monsanto was the provider of Agent Orange, a defoliant that continues to do so much damage in Vietnam even to this day, and the Cancer-causing Round UP weed killer that is at the root of most of the lawsuits. It is also behind much of the Genetically modified foods, many of which are now banned in Europe and have been shown to do large scale environmental damage. Their products also include suspect items like terminating seed stock designed to not reproduce naturally so farmers must continually buy from them.
Both companies have chequered pasts, run ins with the law, very justified negative public perceptions, environmental issues, questionable management practices and ongoing litigations and yet despite the questions around their operations, morality and legality somehow the Temasek team still thought it was a good move to invest in them.
A move that since Bayers share price has dropped over 35% HAS ALREADY COST THEM OVER $2 BILLION and that I am sure is not the end of it.
The decision to make this investment seems even more puzzling since in Temasek’s 2019 annual report they state: –
“As a responsible investor, we look for opportunities to invest in companies addressing global sustainability challenges and we incorporate environmental, social and governance considerations into our investment decision-making and management”
Which by all the above measures Bayer and Monsanto fail at.
But questionable investments like this are just the tip of the iceberg.
Another recent headline maker was the “Salt Bae” affair. Just 4 months after putting $200 million into the flamboyant Turkish restauranteur its parent company underwent a multi-billion debt restructure at the same time as the Turkish Lira sank in value calling in to question both the prudence of the investment and the $1.2 Billion valuation Temasek accorded the company.
News has also dribbled out in the last few years of large losses at StanChart Bank, the Vietnamese Taxi company Vinasun and India Telco Bharti Airtel amongst others alongside fines paid by GLC subsidiaries like Keppel and Sembcorp with new scandals brewing and those are the ones that have made their way in to the public domain with who knows what hidden in the shadows. All of this on top of the major loss of over $50 Billion during the 2008 financial crisis and we don’t see many positive signs on how Temasek is making investment choices.
Combine this with the opacity around Temasek’s operations and costs, including its CEO’s salary, seeing them restate their accounts on multiple occasions (2013 and 2014 and using a new standard this year) and having the same auditor for 10 years against all industry standards, KPMG (a firm banned by several governments for questionable practices) and you have to step back and ask what can we trust about what Temasek’s says and what it does and how much faith can we have in them running and owning our GLCs and a large chunk of our national reserves?
While I may not agree with every statement that Kenneth makes, I believe this article, the one I referred to yesterday by Professor Balding and others around Temasek’s performance that are now proliferating online warrant closer examination and thinking about.
Singapore is known as a paragon of good corporate governance and prudence with solid national reserves and it uses that reputation as one of its strengths when positioning us in the world, but it seems Temasek is rapidly calling in to question that reputation and our national reserves along with it.
What is equally worrying is that from the outside nobody appears to be asking the hard questions or doing anything about it.
If we want Singapore to progress and not regress I believe it is high time we brought voices into positions of authority and influence that will ask those hard questions and take concrete actions to fix any problems uncovered and do it before the harm done becomes irreparable.
This was first published on Brad Bowyer’s Facebook page and reproduced with permission.