Temasek's role in Thailand's political crisis
By Jon Fernquest[Introduction | Vocabulary | Article | Reading Questions | Answers]
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Today's article takes a close look at the political fallout from the Shin Corp sale and the way that the Singapore government has responded to the problem.
The article is written by Thitinan Pongsudhirak, director of the Institute of Security and International Studies (ISIS) at Chulalongkorn University. For further reading, read Ajaan Thitinan's articles at Project Syndicate.
Read previous Bangkok Post articles by Ajaan Thitinan complete with vocabulary and reading questions:
1. A full analysis of the coup
2. The art of the bloodless coup?
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What stance has the Singapore government taken to the role of Temasek in Thailand's political crisis?
2. What did Temasek give the Thaksin family the opportunity to do?
3. What series of events did Temasek's purchase of Shin Corp set in motion?
4. What position does the prime minister of Singapore's wife have in Temasek?
5. What is the prime minister of Singapore's position on the Thai coup?
6. What are the origins of Thailand's political crisis?
7. What were Lee Kuan Yew's comments on the Shin Sale?
8. How can the Shin Corp deal be seen as a legitimate deal between two privately held companies?
9. How can the Shin Corp deal be seen as an illegitimate private deal between the leaders of two countries?
10. How was transparency and openness avoided in the Shin Sale?
11. What is the dilemna that the Thai government faces between current nominee shareholding practices and attracting foreign investors?
12. What assets was Shin Corp's wealth initially based on?
13. Were Shin Corp's telecommunications concessions obtained in a legitimate fashion?
14. What disastrous consequences has the Shin Sale indirectly led to?
15. What has happened to the price of Shin Corp stock since the deal?
16. What steps has Temasek taken in Bangkok to protect its deal?
17. Have there been any discussions regarding the deal between the two governments?
18. What effect has the Shin Corp sale had on Thai-Singapore relations?
Bangkok Post Article: November 13, 2006
Temasek's role in Thailand's political crisisDoing a Thaksin deepens Singapore's culpability
By THITINAN PONGSUDHIRAKIn view of their scandalous dealings with deposed prime minister Thaksin Shinawatra and his family, senior Singaporean officials are remarkably defiant. Instead of owning up to their complicity in hastening Mr Thaksin's demise and contributing to Thailand's long and costly political crisis, both Prime Minister Lee Hsien Loong and Minister Mentor Lee Kuan Yew remain adamant that Temasek Holdings, the Singapore government-owned holding company that purchased the Shinawatras' 49.3% stake in Shin Corp last January to the tune of 73.3 billion baht, is a run-of-the-mill business enterprise that made a sound investment decision.
Never mind that Temasek's decision to let Mr Thaksin and his family cash out of Shin Corp sparked protracted protests in Bangkok that culminated with the military coup and Mr Thaksin's ouster on Sept 19. Never mind that the executive director and CEO of Temasek is Prime Minister Lee's wife, Madam Ho Ching, who has more or less kept out of the limelight in favour of her husband and father-in-law.
As if to heap insult on top of injury, Prime Minister Lee stated in a speech to the Asian-European Editors Forum on Oct 6 that the Thai putsch was a setback for the country's democratic system. Justifying his view on Mr Thaksin's electoral prowess, Mr Lee completely missed the essence of the Thai crisis. It was Mr Thaksin's erosion of legitimacy on a long trail of constitutional violations, corruption and abuse of power that led to his downfall. Elections without accountability and checks-and-balances under Mr Thaksin's Thailand were necessary but not sufficient for acceptable democratic rule.
Minister Mentor Lee followed his son's remark with the insistence that the Temasek-Shin Corp transaction was completely above board.
Both father and son did what Mr Thaksin would have done. They insisted on what is legal on paper but illegitimate and possibly illegal in practice. On the one hand, Temasek is ostensibly an independent company that bought Shin Corp, nominally owned by the Shinawatra children, not Mr Thaksin himself. On the other, Temasek is owned by the Singaporean government and directed by the prime minister's spouse, and Shin Corp was ultimately owned and governed by Mr Thaksin, despite the absence of his signature on paper.
To finalise the deal, Temasek set up a front operation through Kularbkaew, a nominally majority Thai-owned company that bought Shin Corp with loans from Temasek, a circumvention of local foreign business law and its foreign shareholding limit of 49%. Such legalistic manoeuvres were Thaksinesque, manipulating the spirit of the law, rules and regulations. Temasek's actions have caused ripples through the foreign investor community in Thailand, and have posed a conundrum for Thai policy makers, who have long been lenient with the enforcement of the Foreign Business Act. Official investigations on nominee shareholding have opened a can of worms that could prove detrimental both to foreign investment and to the Thai economy unless an acceptable compromise that imposes punitive measures on Shin Corp without adversely affecting foreign companies across the board can be found.
To be sure, Shin Corp comprises tainted assets based on state concessions Mr Thaksin carved out unscrupulously, ranging from a mobile phone service and a television station to a satellite operation. That Shin Corp's paper wealth more than trebled during Mr Thaksin's rule was critical in laying the basis for the anti-Thaksin demonstrations. His political power increased his commercial wealth with the benefit of blatant conflicts of interest.
The political fallout from Temasek's Shin Corp investment decision has been profound. It led indirectly to the fall of a Thai government. For the Lee family to feign ignorance and maintain their self-righteous high ground is disingenuous. It does a disservice to Temasek's intention to navigate a way out of the commercial quagmire. The company has belatedly established an office in Bangkok, presumably to undertake a public relations drive and mount a legal rearguard action to protect its interests. Without Mr Thaksin at the top, Shin Corp's share price has gone into a tailspin. The prospects of Shin Corp companies are utterly murky.
More importantly, the Temasek affair has put Thai-Singaporean relations at risk. Despite his setback remark on Thai democracy and his insistence of Temasek's innocence, PM Lee has seen fit to raise the issue with Prime Minister Surayud Chulanont in their personal meeting. Gen Surayud rightly assigned the Temasek-Shin Corp case to the Thai judicial process. Without assistance from the Surayud government, Thai law will have the final say.
Thai-Singaporean relations at the government level, of course, will continue unimpeded by the Shin Corp scandal. What is at stake for Singapore is the general sentiment among the Thai people towards the island state. If Singapore's leaders want to repair the damage caused by Temasek's misadventure, they should begin by owning up to how the Shin Corp deal impacted the Thai body politic. However reluctant, words of regret are needed to mend relations and restore Singapore's reputation in local eyes.
Indeed, if the Temasek-Shin Corp deal was completely above board, as PM Lee maintains, Singapore officials would not have to repeatedly insist that it was completely above board.
The writer is director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University.
Vocabulary
scandalous - immoral and shocking
defiant - aggresive independence, refusal to compromise
owning up to - admitting you were wrong
complicity - involvement with other people in an illegal activity or plan
hastening - making an event happen faster than it would have
demise - the end or death of something or someone
adamant about y - determined not to change your opinion about y
run-of-the-mill - ordinary, not special
cash out of - sell, turn an asset or business into cash
protracted protests - protests that continued for a long time
ouster - forced to leave a position of power, kicked out
in the limelight - the public is paying a lot of attention to them (because of fame or something they did)
kept out of the limelight - prevent public attention
heap insult on top of injury - insulting after causing injury, thus injuring more
a putsch - a sudden change of government, a coup
prowess - great ability (in some kind of activity, for example in war or business)
accountability - responsible for what you do, must justify your actions
to hold in check, to keep in check - to control
checks and balances - a system for controlling the different parts of a government making sure that none become too powerful,"checks" refers to how each power monitors the activities of the others, "balances" refers to how each power can "use its authority to limit the powers of the others," the philosopher Montesquieu originated this idea (See Wikipedia on separation of powers)
above board - an arrangement or deal that is carried out legally as well as openly and honestly
illegitimate - not legitimate (See Wikipedia on political legitimacy)
ostensibly - something that seems to be true, but actually may not be
a front operation - an operation used to hide something secret
circumvention - go around, avoid
manoeuvres - make skillful and clever changes to a situation to benefit from it (move skillfully)
-esque (Thaksinesque) - in the manner of, in a way that is similar to
caused ripples through - caused effects in
a conundrum - a problem that is very difficult or impossible to solve (like a puzzle)
lenient - less strict or severe than expected (said of somone with power or authority)
Foreign Business Act - the laws about foreign ownership of businesses in Thailand
nominee shareholding - when locals (Thais) allow the real foreign owners to use their names, so that they can get around foreign ownership laws
to open a can of worms - to do something that is a lot more controversial than you realise (that will create unexpected problems, not that this is almost a prefect adjective for describing the Shin Sale)
detrimental to y - harms or damages y
a compromise - accept a situation different from the one they want, but that makes other people happy (compromise helps people reach an agreement where there are benefits for both sides)
punitive measures - punishment
x taints y - x harms the status or reputation of y
tainted assets - the status of the assets is harmed by the way they were acquired
state concessions - a special right or privilege given by the state (for example the right to run a phone company given to only a few)
to carve out - to get something from great effort
unscrupulously - acting in an immoral or dishonest way to get what you want
paper wealth or profits - wealth or profits that are stated to exist in official documents (but may not actually exist, if the assets behind this wealth are sold and converted into cash they are no longer "paper")
trebled - triple (become three times greater)
blatant - doing something bad in a way that is obvious and open for everyone to see
conflicts of interest - (See Wikipedia on conflicts of interest)
political fallout - the unpleasant political events that follow from an event (for example the political fallout of the Shin sale)
profound - great (much more than expected_
feign ignorance - pretend you don't know
self-righteous high-ground - taking a position that there is absolutely nothing wrong with what you did
disingenuous - insincere and dishonest (for example it is disingenuous to tell a man that he is handsome when you actually think he is ugly)
do a disservice to y - harm y
a quagmire - a difficult situation that it is difficult to escape from (original meaning: soft wet land that your feet sinks into when you walk on it)
belatedly - happened later than it should have
a public relations drive - doing things to change public opinion about an issue
mount a rearguard action - trying very hard to prevent a bad thing from happening (even though it is probably too late)
gone into a tailspin - fall rapidly (like a plane falling uncontrollably from the sky)
a misadventure - an unlucky event
Answer Key:
1. What stance has the Singapore government taken to the role of Temasek in Thailand's political crisis?
They insist that they bear no responsibility for Thaksin's demise and that the purchase of Shin Corp was a "sound investment decision."
2. What did Temasek give the Thaksin family the opportunity to do?
"Cash out" of Shin Corp, that is convert the business into cash in the bank.
3. What series of events did Temasek's purchase of Shin Corp set in motion?
The Shin Sale "sparked protracted protests in Bangkok that culminated with the military coup and Mr Thaksin's ouster on Sept 19."
4. What position does the prime minister of Singapore's wife have in Temasek?
She is the CEO and head of hte company.
("...the executive director and CEO of Temasek is Prime Minister Lee's wife, Madam Ho Ching.")
5. What is the prime minister of Singapore's position on the Thai coup?
He feels that it was a "setback for democracy."
("...Prime Minister Lee stated in a speech to the Asian-European Editors Forum on Oct 6 that the Thai putsch was a setback for the country's democratic system.")
6. What are the origins of Thailand's political crisis?
The coup resulted from Mr Thaksin's "erosion of legitimacy."
Mr. Thaksin's erosion of legitimacy resulted from a long history of "constitutional violations, corruption and abuse of power" as well as "elections without accountability and checks-and-balances."
("...Mr Lee completely missed the essence of the Thai crisis. It was Mr Thaksin's erosion of legitimacy on a long trail of constitutional violations, corruption and abuse of power that led to his downfall. Elections without accountability and checks-and-balances under Mr Thaksin's Thailand were necessary but not sufficient for acceptable democratic rule.")
7. What were Lee Kuan Yew's comments on the Shin Sale?
It was completely "above board." "Above board" implies that the deal was carried out legally and openly. The transaction was definitely not open, being a secret until the day it was concluded. Legality also seems doubtful in the nominee shareholding structure of the deal.
("Minister Mentor Lee followed his son's remark with the insistence that the Temasek-Shin Corp transaction was completely above board.")
8. How can the Shin Corp deal be seen as a legitimate deal between two privately held companies?
Temasek is "ostensibly an independent company that bought Shin Corp, nominally owned by the Shinawatra children, not Mr Thaksin himself."
9. How can the Shin Corp deal be seen as an illegitimate private deal between the leaders of two countries?
Temasek is "owned by the Singaporean government and directed by the prime minister's spouse, and Shin Corp was ultimately owned and governed by Mr Thaksin, despite the absence of his signature on paper."
10. How was transparency and openness avoided in the Shin Sale?
To get around Thailand's foreign business laws Temasek created the as a "front operation" the company Kularbkaew.
("To finalise the deal, Temasek set up a front operation through Kularbkaew, a nominally majority Thai-owned company that bought Shin Corp with loans from Temasek, a circumvention of local foreign business law and its foreign shareholding limit of 49%. Such legalistic manoeuvres were Thaksinesque, manipulating the spirit of the law, rules and regulations.")
11. What is the dilemna that the Thai government faces between current nominee shareholding practices and attracting foreign investors?
Foreign shareholding laws have not been enforced over the years and nominee shareholding that violates the laws has become the norm.
Public opinion has called for enforcement of the laws in the case of Shin Corp, but this enforcement might frighten away investors.
("Temasek's actions have caused ripples through the foreign investor community in Thailand, and have posed a conundrum for Thai policy makers, who have long been lenient with the enforcement of the Foreign Business Act. Official investigations on nominee shareholding have opened a can of worms that could prove detrimental both to foreign investment and to the Thai economy unless an acceptable compromise that imposes punitive measures on Shin Corp without adversely affecting foreign companies across the board can be found.")
12. What assets was Shin Corp's wealth initially based on?
State telecommunications concessions "ranging from a mobile phone service and a television station to a satellite operation."
13. Were Shin Corp's telecommunications concessions obtained in a legitimate fashion?
No, "his political power increased his commercial wealth with the benefit of blatant conflicts of interest."
Usually people employed within a government as "civil servants" cannot use their position so blatantly to obtain wealth.
Some point out that Thaksin was a billionaire civil servant, a seeming contradiction and source of illegitimacy.
14. What disastrous consequences has the Shin Sale indirectly led to?
"It led indirectly to the fall of a Thai government."
Rather ironically, people on the Singapore side involved in putting together the Temasek-Shin deal have stated that they did no political risk analysis beforehand. This might be tantamount to admitting incompetence.
15. What has happened to the price of Shin Corp stock since the deal?
It has fallen dramatically. ("gone into a tailspin")
16. What steps has Temasek taken in Bangkok to protect its deal?
They've opened an office in Bangkok probably for public relations purposes and to take legal action to protect its interests.
They have also tried to recruit people near to the Royal Family to boost their legitimacy.
17. Have there been any discussions regarding the deal between the two governments?
Yes, Singapore's prime minister raised the issue with Prime Minister Surayond who replied that this was an issue for the judicial system to resolve.
("...PM Lee has seen fit to raise the issue with Prime Minister Surayud Chulanont in their personal meeting. Gen Surayud rightly assigned the Temasek-Shin Corp case to the Thai judicial process. Without assistance from the Surayud government, Thai law will have the final say.")
18. What effect has the Shin Corp sale had on Thai-Singapore relations?
The private nature of the very public deal has potential to effect in a negative way the "general sentiment among the Thai people towards" Singapore.
