Background and Context of Temasek Charter 2002



Background

1. Temasek Holdings was formed in 1974 as a focal point to hold and manage the Singapore government’s investments in companies for the long-term benefit of Singapore.

2. Many of its businesses have their roots in the history of Singapore’s economic development. For instance, Singapore Airlines was formed through the de-merger of Malaysia-Singapore Airlines after Singapore’s separation from Malaysia, and SembCorp Marine evolved from the commercialisation of the naval dockyard facilities when British military forces withdrew from the Far East. In each case, the goals were to develop economically viable businesses, retain and create jobs, and contribute to Singapore’s economic survival, progress and prosperity.

Relationship with Temasek Companies

3. In the next phase of Singapore’s economic development, Temasek aims to build and nurture internationally competitive businesses. These can leverage on Singapore’s competitive strengths, and in turn, enhance Singapore’s economic resilience.

4. Temasek expects all its companies to continually innovate, explore new technologies or markets, operate on sound commercial principles, and deliver commercial returns in a globally competitive environment.

5. Temasek will exercise its shareholder rights to influence the strategic directions of its companies. But it does not involve itself in their day-to-day commercial decisions.

6. Temasek will continually review its stable of companies, and rationalise or consolidate them where it makes commercial and strategic business sense, so as to enhance long-term shareholder returns.

Group A Businesses – Government Ownership and Control

7. Government needs to own and control companies for various reasons. These include:

• Critical resources – where ownership of a resource is critical to Singapore’s security or economic well-being, or where the business is a natural domestic monopoly for which a market-based regulatory framework has not yet been established. These include water, power and gas grids, airport, and seaport; or
  
• Public policy objectives – where ownership enables the government to achieve specific public policy objectives, by providing services or assuring control for the public good. These include gaming, public broadcasting, subsidised services in healthcare, education and housing, and various public amenities like the zoo and bird park.

8. The government will continue to hold majority or significant stakes in such Group A companies, for so long as there is specific requirement for government ownership or support. Should such businesses become no longer strategic to Singapore, or when viable market alternatives or regulatory frameworks are in place, the government will divest or dilute its shareholdings.

9. Where Temasek has stewardship of Group A companies on behalf of the government, Temasek will ensure their financial discipline and sound management, with a clear focus on customer orientation, strategic and operational effectiveness and economic viability in order to fulfill their respective missions.

Group B Businesses – International / Regional Potential

10. Regardless of ownership, Singapore companies cannot depend solely on the domestic market for their long-term growth, particularly in view of the trends in technology, liberalisation and deregulation.

11. Group B businesses within the Temasek stable are those with the potential to grow beyond the domestic market, into the regional or international markets. Companies such as PSA Corporation have internationalised to leverage onto the global network, while others, such as DBS Bank, have expanded beyond their domestic market base to take advantage of regional opportunities.

12. Temasek is open to Group B companies partnering other companies or shareholders to regionalise or internationalise where it makes strategic or commercial sense. Temasek is prepared to dilute its stake through the issuance of new shares, or mergers or acquisitions in order to support the long-term success of these companies as regional or international players.

13. Temasek may also, from time to time, invest in new businesses with regional or international potential in order to nurture new industry clusters. These are likely to be in new growth sectors which entail high risk, large investments or long gestation periods, where private enterprise in Singapore is unable or unwilling to assume risks. Temasek will be highly selective in making such new investments.

Rationalisation and Divestments

14. Since its inception, Temasek has progressively divested its stake in companies which are no longer strategic to Singapore or relevant to Temasek’s mission. It has also publicly listed major companies which have evolved from statutory boards, such as Keppel Corporation and Singapore Telecommunications, to broaden their share ownership base and support their growth. Temasek companies have in turn divested their non-core assets and listed some of their major shareholdings over the years.

15. Temasek will continue to rationalise and consolidate its shareholdings, where there are opportunities to improve shareholder returns. It will continue to divest businesses which no longer require government participation, or which have limited potential for regional or international growth. This will enable Temasek to focus its financial and management resources in areas where it can make a distinct contribution to developing the Singapore economy through successful international and regional enterprise.

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