The following transcript has been edited for ease of reading and to provide context for readers who were not in the discussion. Parts of questions and answers not material to the key subject under discussion have been removed. Minor edits have been made for style and/or grammar, to aid readability. Some duplicate material has been removed.

 

MR DHANABALAN Opening Statement: 

OK, thank you very much. Good morning again to all of you.

You've got the statement, which sets out the announcement of my retirement with effect from 1 August

This has been a long process. I've been looking forward to my retirement, which has taken much longer than I had anticipated. It's not yet time for me to say goodbye to my staff, which I will do during the course of this week.

The first thing I want to do is to thank the staff and management and board of Temasek, for allowing me to be a part of the team for the last 17 years.

Most of the people who you see in Temasek today, barring a few, joined after I became Chairman.

Looking back at my working life from 1960 till now, there are many pleasant surprises, and Temasek's development has been one of the most pleasant surprises to me.

I think all of you are aware that 17 years is a long time in the corporate world, and the performance of an institution like Temasek can always be traced to the quality of the management.

I've been very fortunate and privileged to have had the opportunity to work with a very remarkable team of dedicated and capable colleagues over the last 17 years, those on the board as well as the management.

In different phases of an institution's history and journey, different types of competencies, capabilities and strengths are required.

One of the most important decisions I took as Chairman, some years after I was appointed as Chairman, was to bring Ho Ching on to the management team; first onto the board, and then the management team, in 2002.

To be quite frank, when I brought her in, I did not have a clear idea as to what Temasek should be. All I sensed was that Temasek could be more than what it was.

And I had to look for someone who had the creative ideas, the courage to take the ball and run with it without specific directions.

Ho Ching, and the team that she gathered – which has itself gone through changes during the time that she has been here – have done a remarkable job to bring Temasek to where it is today.

I want to take this opportunity to record my deep appreciation to Ho Ching and the team, as well as my fellow board members who worked with me since 1996.

I think the management and the board are well aware that Temasek cannot remain where it is.

The world is changing. It’s getting increasingly volatile. There’ll be much turbulence in the future.

But, from my experience and knowledge of the management team and what has happened over the last 17 years, I'm completely confident that Temasek has what it takes to journey successfully to 2020 and beyond.

I'm very glad that I’ll be succeeded by Lim Boon Heng, who was my colleague in Cabinet and whom I have known for many years.

He's experienced in both the public and private sectors, especially in the last few years in the business side of NTUC. He also has a very strong connection with people on the ground. His people orientation and leadership experience will be of great and immense help in his role as Chairman of Temasek.

That’s all I'd like to say. I'm open to questions.

 

Question about his greatest satisfactions as he looks back as Chairman, and what he would do differently if he were given the opportunity.

MR DHANABALAN: Satisfaction for me is the right term, because when you look back on 17 years, many things had happened to bring Temasek to where it is today.

To have been given the opportunity to be part of a team to bring about the kind of changes to make Temasek a respected institution in Singapore and the world is something that I count as a great privilege to be a part of.

As you know we've made changes over the last 10 years in the way Temasek does its business. If you read our Temasek Review you would have noted, over the years, some of the changes.

When we started Temasek in 1974, it basically inherited a few companies in which the Government had invested.

The idea, at that time, was that the Government should not be involved in management of businesses. The Government and the civil servants should focus on policy. 

(The Ministry of Finance then owned some 35 companies.)

Dr Goh Keng Swee, the then Finance Minister, decided that the Minister for Finance should not be involved in the management of these companies, and Temasek was set up to own and manage these companies. 

Many of those companies have since closed down or been sold off; some still remain in our portfolio. 

[Afternote: The full list of the initial portfolio of 35 companies is provided in the Temasek Review and may be accessed at the Temasek website here.]

For many years Temasek continued in that mode, making some small investments, basically looking after the companies it had inherited.

There were some attempts to invest, especially during the Asian financial crisis, but not in a great concerted way. It was only from 2002 onwards that Temasek began to really seek to invest outside Singapore.

First of all we decided to focus on an emerging Asia because we could see that rapid growth in Asia - China, India, Indonesia, Thailand, Vietnam and so on. And then we began to look at other emerging markets like those in Latin America.

So the shift from just purely a more or less Singapore investment company to become an international investor is to me a source of satisfaction.

We were looking at emerging markets because we saw them growing fast. There were many opportunities that we could see - opportunities that came about because of rapidly growing economies, which caused structural changes within the society and the economy, and a fast growing middle income group, new local champions growing.

We wanted to get in on the ground floor.

The demand for materials from China and India created opportunities for us, and some of the other countries that supplied this demand.

So we were looking for these types of themes to invest in, and we’ve done that quite successfully.

Then we thought that if we were going to become an international investor, people should know who we are. We cannot continue to remain a mystery.

Therefore we decided that we would come out with our financials on a group basis, in what we call the Temasek Review.

We also issued bonds, which again required us to reveal much of our financials to the bond holders.

We became known among international investors because many of the investments we make were with co-investors. And co-investors needed to be comfortable who they're dealing with - they needed to know more about us.

That's part of the main reasons why we decided that we will open our books, as it were, to the investment public.

And then in the process of building up the institution, we needed to tell people, both in Singapore and globally, who we are, what kind of institution we are, how we are growing, how we are growing, what are our policies, what is our philosophy.

In this way, we were able to establish, with both the investment public and the talent world, a good understanding of who we are.

And we have been successful in working with many co-investors.

And when we want to invest in a company, even without co- investors, the company welcomes us because now they know who we are, especially companies outside Singapore.

So that’s another reason to be satisfied.

I'm not saying I achieved this; I’m saying this is what has happened in Temasek because the management has done all this.

Then we speeded up the (change in the) governance model of Temasek.

As I mentioned to you, when Temasek was set up, the idea was that civil servants and the Government would not be involved in business; therefore the investments were put into Temasek.

The process of the Government not being involved took time to develop.

As you know, the first two chairmen were civil servants.

I don't know how you consider me … I've never been a civil servant but I've been in public service all my life – EDB, DBS, whether they're considered public service, partly, I suppose – and then Temasek.

Because of the early years of history, the first 15 years or so of being very closely connected with the Government, the key decisions were made in close consultation with the Government, including the appointment of the chairman, the appointment of directors, the appointment of the CEO.

In fact before Ho Ching, all the CEOs were civil servants.

[Afternote: the Temasek CEO before Ho Ching was another senior executive from the Singapore Technologies group, not a civil servant; the GMs or Presidents before that were civil servants seconded to Temasek.]

So we have hastened that process of Temasek becoming more and more commercially driven, almost a private sector kind of enterprise.

And our appointments within Temasek as well as in the Temasek portfolio companies, such as DBS, SIA, Sembawang, Keppel, and wholly owned companies like Mediacorp, PSA, and SingPower – decisions on who should be on the board, who should be the chairman, who should be CEO, are all taken at the board level.

That's a major change.

And it makes us quite distinct and unique in the world of government-owned enterprises.

As with any private enterprise, if you do a major move, you will speak to your major shareholders – it happens in the private sector.

Obviously, we don't keep secrets from the Government on major moves we want to make, we keep them informed.

But basically at the end of the day, the board and management of Temasek are responsible for the performance of Temasek.

Similarly, in our relationship with our own companies, in which we have interests from small to controlling interests, to 100% interests, we leave those decisions entirely to the board and management.

We do not appoint our own people onto the board. We do recommend people, but the boards make their decision.

Another major development over the last 17 years has been the composition of the boards of these companies.

About twenty-five percent of the members of the boards of the Temasek portfolio companies are non-Singaporeans.

Because all the companies are now global companies – for example, Singtel or SIA. They operate in the world, and they need to get successful businessmen who understand different markets to be on the board.

We have managed to persuade many people to come onto the boards of our companies.

Temasek itself has a Swedish businessman, Marcus Wallenberg, and we are getting other non-Singaporeans to come on the Temasek Board.

The board of Temasek, including myself, spend a lot of time meeting international business people both in Singapore as well as during our travels.

We've built up quite a good database of people who are successful, who have interests in this part of the world, who are friendly to Singapore, who can form the pool from which we can draw directors for Temasek as well as for Temasek companies.

This has taken a lot of effort but we have now a good database.

The last point I want to make is that we have a wide variety of companies in our portfolio.                                           

They’ve common problems, common issues, such as management or risk management or internal audit or how to remunerate the members of the board of directors. So there's much that they can learn from each other.

We have facilitated a sharing of experience in areas which do not involve the giving of privileged or sensitive information. Many of the companies are listed and cannot share what is not public information. However, there are many other experiences which are not market sensitive or privileged, that they do share (and learn from each other).

The sharing of experiences has helped overall to improve the whole management process with Temasek operating companies.

So I’m very satisfied with the progress.

And I'm sure that Lim Boon Heng will take this much further, and not only much further but changes will be required because circumstances are changing.

 

Question about long process and timing of retirement.

MR DHANABALAN: My personal view was that I should have retired at the age of 70. Next month I will be 76.

I’d set myself a target (to retire at 70), but it didn’t work out.

There are many reasons for postponing the decision because there were other more important things to attend to. There are reasons for the date being pushed back.

It's not something that happened overnight; it's been in the works for some time.

The board of Temasek, at least once a year, usually twice a year, reviews succession at the board level, at the chairman level, at the CEO level, within Temasek.

And we also keep an eye on the succession process in the companies in which we have interests. Not that we ever want to tell them what to do, but we keep a close eye to make sure they have a process too, to identify suitable candidates as board members, as chairmen and as CEO.

These things cannot take place overnight.

 

Question about his response to the naysayers who are always critical of Temasek, its work and its leadership, notwithstanding his satisfaction that he has mentioned.

MR DHANABALAN: Let the results speak for themselves!

We are not in the exercise of publicly defending what we do.

As an investment house, there will be ups and downs in the value of our portfolio. We've been through many crises since we started. 

I personally have gone through many economic crises in my life in business, in the civil service.

Almost immediately after I joined EDB, we had the Indonesian Konfrontasi. Overnight, our entrepot trade with the region came to almost zero.

We were all young. We thought the world around us was falling apart.

Then as soon as we recovered from that, with the end of Konfrontasi in '65, the British announced they were going to pull out. Thousands of people were going to lose their jobs. It was another big shock.

So we’ve come through all these crises in Singapore, before Temasek was set up.

After Temasek started, there were the OPEC oil shock, the recession in 1985, the Asian financial crisis, the dotcom bust, 9/11, SARS, the global financial crisis - many, many crises.

And Temasek has not been left unaffected.

But we've had a team which had been prepared to be responsive, to weather all these crises.

So people may – the naysayers – they may be critical, especially when there's a downturn. And when our portfolio value goes down, they say we lost money. And when the portfolio goes up, they say oh, that's because market prices have gone up. This is almost exact quotation from what I read in the media!

We cannot be affected in our jobs by the perception of others with their different views and their different moods. We have to focus on producing results.

We must be focused on the perception of companies in which we want to invest; whether they welcome us, whether they see us as a value-adding shareholder; the perception of co-investors with whom we want to invest in various projects; the perception of people who can contribute to our management by joining us as part of the management.

These are the things that we need to be concerned about.

At the end of the day the performance must speak for itself.

 

Question comparing Mr Lim Boon Heng’s experience and why Mr Dhanabalan thought he was suitable as chairman of Temasek.

MR DHANABALAN: Well, no two chairmen can be the same - we all come from different backgrounds.

So first of all, we have to see whether the person is capable to learn quickly, whether he has shown himself to be able to fit into new environments.

And Lim Boon Heng has shown that.

He was in NOL, brought into politics, plunged into the union movement, which he knew nothing about and he made a very good, fantastic success wherever he was.

Adaptability, the ability to learn; rapport with people; whether you see yourself as a general leading the charge, or as part of the team working on strategies, working together – I think that he (Lim Boon Heng) has all that, in my view, is required to be a good chairman of Temasek.

Lim Boon Heng’s background is different.

His only commercial background is with NOL, but in the unions, he was very much involved in the businesses of the unions, advising them and so on.

He put together the (NTUC) units under a union cooperative holding company. He worked with a wide variety of business interests, and he's been keeping tabs of those business interests. He's not a normal trade union leader. He's got quite a bit of business experience.

 

Question about whether Mr Lim’s appointment marks a shift in direction for Temasek.

MR DHANABALAN: Well, I can't speak for him.

No one person determines a shift. The chairman together with the board, and the management, determine which direction that they take.

It is not driven by the whims of one person at the top.

It's very often a response to changing situations, a response to opportunities that arise. And it is the response of the team as a whole.

There will be changes but I don't think the changes will be because somebody new is saying we need to go in this direction.

 

Question about whether Mr Lim will connect more with people as Chairman.

MR DHANABALAN: I don't think it's accurate to say to connect more.

What it requires for someone at the Chairman’s level – the Chairman is not an executive – is he must be able to establish good connection with the team, not just with the CEO.

We have a very clear understanding in Temasek, in our working style, that I don't necessarily have to work through the CEO.

I can contact anyone, have lunches with the senior staff one on one. I know what's happening.

The CEO knows it. And she welcomes it so that I have a good feel, I have the pulse on many people.

And she does not think that because she's the CEO, everybody must work through her to me when they want to inform me about anything.

So we have a fairly open culture. And I think Lim Boon Heng will fit perfectly with the culture.

 

Question on challenges Mr Lim Boon Heng will face on investments, and on what Mr Dhanabalan anticipated.

MR DHANABALAN: Challenges will arise mostly from changes in the economic, macroeconomic environment in Singapore and internationally.

On what I anticipated, I'm very fortunate, and it’s entirely not due to me, that we closed the year at a record of (Singdollar) 215 billion.

Will that continue to increase? Will it go down? I don't know.

The world is so volatile. Ups and downs are not determined purely by how Temasek makes its investments, because the market price determines our portfolio value.

So the challenge will be to establish over the next 5, 8, 10 years, in spite of all the ups and downs, a steady trend to increase in value.

We should not be alarmed if values go down in one year.

Well, every time there's a crisis like SARS, the global financial crisis, Asian financial crisis, you've got to sit back and ask yourself is this the end? No, certainly not!

And I've learned through the years to be very philosophical and say “this too shall pass”, because things don’t really remain where they are.

 

Question about his plans post-retirement.

MR DHANABALAN: I have no definite plans.

I have some vague ideas. I will probably be a little more active in my church than I am currently. Though I don't have anything specific, I will probably be involved in some institution that deals with people who are marginalised or who could do with some advice, connections, contacts.

But I'm not sure. I do not have any arrangements (at the moment).

Certainly I'm not going to spend my time playing golf, at which I'm very poor, I don't believe in punishing myself!

I do a lot of reading but pleasure reading is probably not best thing to do. You’ve got to read with a specific purpose, so I will be doing that quite a lot.

I don't have anything clear in my mind at the moment. My retirement has been postponed so many times that I have not thought of anything especially! Now, I’ll let it happen first before I think of what I should do.

 

Question about whether he will continue to be involved with Temasek.

MR DHANABALAN: Temasek has asked me … well, Lim Boon Heng has asked me to continue in the capacity of advising him. I'm always open to that.

He knows he can contact me any time. And I intend to have regular lunches with him so that we can exchange views. I think he says in the statement that he wants me to continue to advise him, which I shall do. But it will be in an honorary capacity.

 

Question about whether there will be further changes in the team?

MR DHANABALAN: Further changes in the team? Over the coming years of course there will be changes.

As I said, the board is constantly looking at the succession. At some point, the CEO will be succeeded, so over the next 3, 5 years there will be changes. It's entirely up to the board what kind of changes they want to make.

But the changes will not result from the fact that I'm going. That will not be the case. I'm quite certain about that.

 

Question following on from comments about the involvement of overseas directors in Temasek companies, and in Temasek.

MR DHANABALAN: It depends very much on the company. Some companies obviously will have more because they are becoming more and more international.

The major part of Singtel’s income now is from outside Singapore; a good part of Singpower’s revenue is from outside Singapore; PSA, Keppel, Sembawang.

They are all international companies, they are not just Singapore. They're based in Singapore but they're international.

If you look at our Temasek Review, where we break down the portfolio according to geographical areas, you find that 70% is outside Singapore.

It doesn’t mean that these are companies (based) outside Singapore – they are Singapore companies with their investments and values from outside Singapore.

If you go by Singapore (incorporation of) companies, of course, the overwhelming majority of companies in which we have interests are Singapore companies, but they themselves have investments all over the world.

Take Singtel, they're in India, they’re in Thailand, they’re in the Philippines, they're in Indonesia; Keppel is in Brazil, Middle East, Philippines.

So our companies are all over the world. So if you look at the underlying portfolio of each company, the value of the portfolio of each company, 70% of the underlying value is outside Singapore. So we need to get people from outside Singapore (to go) on the boards.

Follow-on question about whether there is a percentage target for non-Singaporean board directors.

MR DHANABALAN: No, no, no. There's no percentage.

I'm just stating what the current situation is. In one company, it may be more; another company, it may be less; in one company, it may be zero. But on the whole, it’s 25% (non-Singapore directors on the boards).

The percentage of non-Singaporean board directors can go up.

We hope it can go up, because that will be reflective of the (international) business of the company.

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