U.S. Prof lambasts Singapore’s “Temasek model” for investing in failing individuals and products

February 10, 2010 by admin
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Written by Our Correspondent

Beijing-born Massachusetts Institute of Technology (MIT) political economist Professor Huang Yasheng had criticized Singapore’s state-linked enterprise model dominated by its two giant sovereign wealth funds GIC and Temasek Holdings as a “sure-fire way to stifle the economy in the long run.”

In a recent speech made at the Civil Service College, Prof Huang urged Singapore to “rethink” the “Temasek model” and warns that Singapore’s state management model has “milked this system for all it is worth.”

“The private sector is the best way to grow the economy. It has the most productive, most innovative and entrepreneurial culture. The state-owned enterprise system doesn’t give you that….You are already hitting the wall. Retaining this strategy could mean sacrificing future growth that is possible only through a bigger, more dynamic private sector,” he said.

Prof Huang felt that governments should not get involved in venture financing as they are using taxpayers’ monies and questions how the government can defend its decisions to invest in “failing individuals and projects”:

“Nine out of 10 investment projects fail. Does the government have such a high tolerance for risk? It’s taxpayers’ money, right? I don’t think, politically, it’s legitimate for the government to keep investing in failing individuals and failing projects. How do you defend these decisions?,” he asked.

Temasek Holdings is led by the wife of Singapore’s prime minister Ho Ching. It had lost billions of dollars in failed overseas investments such as Thailand’s Shin Corp, Australia’s ABC learning, and U.S’s Merrill Lynch. Ho Ching is an engineer by training.

GIC has been headed by Lee Kuan Yew since its inception in 1981, a lawyer by profession who has never worked in the financial industry before.

Prof Huang opined that Singapore should expand its private sector in order to compete with China and India:

“Maybe a better way is for the government to fund more basic research and then allow universities, private equity firms, venture capital firms and rich individuals to take care of the rest. That is because even when the state sector is well managed, it is not as innovative as the private sector, he says. From a technological development point of view, you need a bigger private sector to compete, to come up with new products, processes and technologies, to better compete with India and China.”

Under Singapore’s state-model enterprise, civil servants are often placed in leadership positions in its major state-linked companies and research agencies. For example, the current head of A*STAR is Lim Chuan Poh, a former Chief of Army with no prior experience in the private sector.

Prof Huang felt that creative thinking is often in short supply with civil servants leading the charge due to the culture they are immersed in:

“Civil service culture is about discipline. It’s about execution. It’s about efficiency. Entrepreneurial culture is about challenging the authorities, questioning the existing ways of doing businesses, moving away from the routines and norms. It’s about the unconventional, rebellious and diverse. These values are almost polar opposites.”

He also criticized Singapore’s education system for “not producing diversity in ideas and unconventional ways of solving problems” and warns that Singapore risks going down in history as an “economic has-been” if it fails to exploit the potential of its private sector.

Prof Huang had hit the nail on the right spot about the macroeconomic problems plaguing Singapore – its one-dimensional political economy. However, he is not aware of the political implications of the “Temasek model” which serves two purposes: one, to ensure the continued political hegemony of the ruling party, or rather a select group of people and two, to keep the citizenry weak so that no alternative centers of power can emerge to challenge the status quo.

As entrepreneurs are fiercely independent, unconventional and rebellious by nature, they cannot be brought easily under control or co-opted into the system. Having a few rich self-make millionaires running around will pose a threat to the political elite, as Thailand’s Thaksin Shinawatra and South Korea’s Lee Myuang Bak had shown.

Unfortunately, for a repressive, insecure and paranoid regime which is bent on complete control and dominance at all costs, it is unlikely to see the profound wisdom in Prof Huang’s words and Singapore will have to pay the price for its ignorance one day when we are overshadowed completely by China and India.

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29 Comments on "U.S. Prof lambasts Singapore’s “Temasek model” for investing in failing individuals and products"

New Insight on Wed, 10th Feb 2010 2:08 pm

If Professor Huang Yasheng is right, then why the US is failing where China using its trillion reserve which is repeating the model like Singapore and become a success. I do not think the China giants private sector are not politically linked. Singapore is straight forward as you can see how they communicate. China is sophisticated but the fundamental principle is the same as LKY realist principle.

Big eat Small is the nature formula. Professor Huang Yasheng is giving his influence to break up GIC and TH. This would means China giants has grown so big and talk loud to bully small flies like GIC and TH. Imagine China Telecom bought over all stakes invested by Singtel and CCB eat up DBS?

one on Wed, 10th Feb 2010 2:13 pm

Shiok!! And this is the “productivity” we are talking about that Singapore are sorely lacking! Entrepreneur Productivity?!

>> “The private sector is the best way to grow the economy. It has the most productive, most innovative and entrepreneurial culture. The state-owned enterprise system doesn’t give you that….You are already hitting the wall. Retaining this strategy could mean sacrificing future growth that is possible only through a bigger, more dynamic private sector,” he said.

This is exactly what REFORM PARTY meant when it calls for dismantling of GLC structure!!

Concerned Citizen on Wed, 10th Feb 2010 2:15 pm

Precisely what Singaporeans have been saying all these years and they have to bring a foreign expert to tell the government the same thing? However I am very pessimistic that any concrete changes will occur to our political, finance, social and education structure in the near future with the current regime. They are too proud and self-righteous to admit that they are wrong all these decades. They know such admission of mistakes of the fundamental economic strategy will open them to attacks from all quarters and could spell the end of their political hegemony. So we will see whether the men in white are really patriots or self-serving kleptocrats that will allow Singapore to sink with their self-serving political ambitions.

x12831 on Wed, 10th Feb 2010 2:26 pm

Foreign investments posed no threat to PAP political control as they are only interested in chasing after profits. The PAP is fearful of the influence of locally-owned independent big enterprises on local politics. The PAP govt actions against the Chinese middle school and Nantah in particular should also be seen as warning against the Chinese business class. Similarly, the rationale behind the huge influx of foreign workers keep the economy going, while maintaining political control over the citizens,regardless of their economic status.

Papsmear on Wed, 10th Feb 2010 2:33 pm

Prof Huang, you are absolutely right!

Don’t know why our Scholars don’t see this…maybe, they are already satisfied themselves with the fat salary they collect each month….why rock the boat and “offend the Golden Goose that” gave you the Millions each month.

Paying Minister Millions …is already an act of Courruption.
Their Minds are Now Corrupted with Wealth and they just follow Orders…even if that ideal or Policy , was seriously wrong.

Cannot Offend the Goose, Right ?

Roy on Wed, 10th Feb 2010 2:40 pm

To: New Insight on Wed, 10th Feb 2010 2:08 pm

Is China a success now? Is US a failure now?

China is on a successful run and US is on a losing streak. Yet if we measure both countries, US is still far ahead of China in many aspects. It would be foolhardy to jump to conclusion now. Let’s see in 20 years time where both countries are.

Transparent on Wed, 10th Feb 2010 3:05 pm

No wonder when I applied for some funding 3 years ago to the EDB, Spring and what-have-you agencies, they just said, the Government is talking about Clean Energy, Nano-tech, bio-tech BUT yours does’nt fall into these categories!!!

I have gone out of Singapore and gotten funding already. NOW I UNDERSTAND WHY CIVIL SERVANTS THINK LIKE THAT.

no brain dogs on Wed, 10th Feb 2010 3:43 pm

The civil servant are just like dogs, follow instruction from their master only wat!

A Tan on Wed, 10th Feb 2010 3:46 pm

In S’porespeak, Temasek is in the private sctor. I kid you not.

BTW, this posting analysing UBS’s results seems appropriate.

http://atans1.wordpress.com/2010/02/10/ubs-that-dog-with-fleas/

WearyTrueBlueSingaporean on Wed, 10th Feb 2010 4:02 pm

@ New Insight

Difference between China and Singapore,.

Currency difference is the key.
U can’t use tat as a comparison.

China with its cheaper currency, attract more investor.
Export is also cheaper due to lower cost.

Singapore has hit saturation point.. That’s why this model is not sustainable.

SG and US are both develop countries, which explains why bot are experiencing the same prob.

Did u see US increasing FT then, compare to Singapore?

native singaporeans on Wed, 10th Feb 2010 4:27 pm

Dear Prof Huang ;

Don’t worry our government investment are All long term investment hmmmmmmmmmm…..maybe about one to two hundred years or lesser or likely more.

Top of all our government have enough money.

To lose tens of billions, no problem.

Steve Wu on Wed, 10th Feb 2010 4:41 pm

Of course what Prof Huang said is not new and is known to many concerned citizens for many years. It is interesting precisely because Prof Huang said it at the Civil Service College where, among other things, the elite Administrative Service receives continual training.

This should be very alarming. Let’s verify his data and take GIC and Temasek Holdings to task.

Nathan, you have forsaken your constitutional duty to commission an inquiry for the protection of the reserves. A presidential inquiry is necessary to uncover the reasons for such failures. The “failing individuals” and “failing projects” invite many questions: conflict of interest, collusion, impropriety, incompetence, mismanagement and so on by the liable person(s), all of which shall be confirmed or refuted by the inquest.

George on Wed, 10th Feb 2010 4:41 pm

the only future for Singapore is change, and we will get change only if we VOTE PAP OUT!!!!!

Stay Focus on Wed, 10th Feb 2010 5:14 pm

If nothing is done to stop this foolish act of this incompetent govt, we will soon be left with nothing as all our CPF money would have been squandered away.

If this happens, what can we do except to dig up MM’s grave and spit on him.

Educated Ah Seng on Wed, 10th Feb 2010 5:53 pm

New Insight on Wed, 10th Feb 2010 2:08 pm
You’re lightning fast to defend mIW whenever there’s criticism against them.
“….US is failing where China ……. which is repeating the model like Singapore and become a success….”
Who said US is failing? Men in the street and me, coffeeshop ah seng know better than MIW ‘yes man’ and the likes, that China never used Singapore model(what? that suzhou Industrial park? failed miserably!!!) China has 5000yrs in history, what makes you think that dafts from pap regime can teach them how to dorun businesses. Have you been to china lately? China is speeding up in privatization of state-owned enterprises. Their auto industries have slowly been establishing a strong footholds in the us, with some brandnames that would be as popular as hyundai and kia soon. Even Warren buffet trashed all his suits and bought all from a Chinese peasant-turned-suitmaker.
Now look at our entrepreneural spirit and culture here in Singapore, Jinx controlled Temasek’s leeches suck dried and dead to every small and medium businessman and entrepreneur. Waht? Temasek model? Take that f**king model and shove everyMIW’s aSS.
New Insight, it smells good to you when LKY farts, but to the real singaporeans, it’s f**king stink !!!

sturmtruppen on Wed, 10th Feb 2010 6:18 pm

To Roy,

You are right.

It seems some folks need to be reminded that higher order mathematics/pure mathematical theorems/relationships are very hard to be written in a “chinese” format and apply across the board unless the chinese adopt whole sale the english/latin mathematical model wholesale. Please refer to below:

http://www.scribd.com/doc/26418681/Energy-Entanglement-Relation-for-Quantum-Energy-Teleportation-Masahiro-Hotta

So the US will still be ahead.

mon on Wed, 10th Feb 2010 6:39 pm

//New Insight
China, itself is aware of its short comings.
I think nobody here understands your argument.
For one, China is a development stage 2.
US is in stage 4.
Why would you compare?
To think that putting monies in places that rots is a good idea, I wonder why?

Alan Wong on Wed, 10th Feb 2010 8:27 pm

In this expert’s view if 2 fools are put in charge of investments, what can you expect ?

cy on Wed, 10th Feb 2010 8:44 pm

to new insight,

China’s model of partly command-driven economy with oligopolistic state enterprises is unsubstainable w/o an overhaul of its decrepit political system.

Ask yourself how many international renowned brands has china produced as compared to usa and you will know the creativity difference between state-driven economy and private-driven economy.

as regard to takeovers,you need not worry, there are rules on takeovers just like other countries. anyway, so long the industry is not strategic like defence or telco, i don’t see anything wrong in inviting takeovers, they may do a better job.

mon on Wed, 10th Feb 2010 10:40 pm

9 out 10 investments failed.

I think he is daring to voice that.

it is true.

How did we tolerate that?

New Insight on Wed, 10th Feb 2010 11:54 pm

I do not support any political party and I always seek a balance between all arguments.

I believe 太极 which is the true form of realist
太极是阐明宇宙从无极而太极,以至万物化生的过程。无极即道，是比太极更加原始更加终极的状态，两仪即为太极的阴、阳二仪

http://baike.baidu.com/view/3914.htm

The world now and always been in constant flux of changes where all arguments may be correct and rational.

Meritocracy has misled the leaders that scholars can compete fairly in the world of unfair competition. In this process, wealth disparity widen and mass contributors are not fairly treated. The opposite end result of this ideology is that the weak and poor are being sacrificed. These weaker and poorer one who suffers are ridiculed by the elite as lazy and stupid or loser.

mon on Thu, 11th Feb 2010 12:31 am

Also, don’t forget TH/GIC contribute 50% of their investment income to the budget.

Goh cock talking mentioned that before.

GIC+TH (2007) ~ 400 billion

GIC+TH (2009) ~ 300 billion

If the return is only 1%, that meant:

investment income (2007) ~ 4 billion
investment income (2009) ~ 3 billion.

Well actually, for 2008,2009, the investment income should be zero because the return for both funds are negative.

So for those of you who thinks it doesn’t matter if TH/GIC keep losing monies, think again!

these funds in the immediate term contribute 50% of their investments returns to the govt budget that they fund all the infrastructure work.

If they keep getting negative returns, not only will the investment income drop by a lot (in this case at least 25%), the future investment income will get smaller and smaller and smaller because the size of the funds get smaller.

With a cost structure that we have in our govt, I wonder why rational people think the constant nonperformance of GIC/TH is an acceptable situation.

This prof is right. Incorruptibility (which we all doubt) is not the only requirement of a good government.

It needs to let people manifest their creativity and inventiveness.

In any case, it is a very expensive govt to have.

sturmtruppen on Thu, 11th Feb 2010 3:55 pm

Perhaps the policy makers/investment decision makers in the PAP need to think and re-think the below:

Even though work stops, expenses run on. Cato the Elder (234 BC – 149 BC).

Proportion your expenses to what you have, not what you expect. English Proverb

What is truth in the past holds truer in the future…unless someone forgot and anyhow fall for the same old con-job money grubbing trick by well-practised and experienced con-men out there in the world.

: (

Funny on Fri, 12th Feb 2010 11:46 am

It is funny. You know why?
The PAP think-tank and leadership itself is facing competition from foreign talents!

Annie Lim on Sat, 13th Feb 2010 6:50 am

The only way we are all going to make the Lee family accountable is to vote in all the opposition parties in future elections. Count my vote in.

Happy tiger Year on Sun, 14th Feb 2010 11:27 am

it wld be gd to hear frm nathan what he thinks abt the UBS investment. and what happened to shin corp. until i saw the comments here talking abt nathan, i almost forgot he exists. now is the time for our hnorable president to give his views!

Neil Bishop on Sun, 14th Feb 2010 1:17 pm

The Lee Family cannot afford to open up Temasek or GIC because the announced losses are only about 30% of the real losses. If they opened up the two companies in any way, shape or form, as they did with Chip Goodyear before he decided to run away rather than compromise his integrity, Singaporeans will realise that the Lee Family has been deceiving them for years about the success of Temasek and GIC and thus they will question the performance of the Lee Government especially as it relates to economic management.

Clement Tan on Sun, 14th Feb 2010 6:56 pm

“He also criticized Singapore’s education system for “not producing diversity in ideas and unconventional ways of solving problems” and warns that Singapore risks going down in history as an “economic has-been” if it fails to exploit the potential of its private sector.”

Since it is Chinese New Year, I will refrain from criticizing the PAP too much. Here is to the next 10 years under PAP’s leadership and its diehard supporters. Live long and prosper.

Charles on Sun, 14th Feb 2010 11:53 pm

“The Lee Family cannot afford to open up Temasek or GIC”
In any political history past and present, who dares to put their heads on the chopping board? at least not until some insiders willing to leak out the books to the public, if not then it is as good as telling you people that your money is still “SAFE” in their hands.