Now, however, the company has come forth with its side of the story. On Sept. 28, Temasek managing director for strategic development Jimmy Phoon revealed key aspects of the transaction that will have an impact on new investigations into Thaksin’s alleged corruption. Two key details stand out: he says Temasek was not informed that the sale was structured so that the prime minister’s family would avoid taxes, nor was payment made into offshore bank accounts, as has been reported. Phoon insists that Temasek’s motivations were purely commercial, rejects the notion that Temasek ignored glaring political risks and bears no responsibility for the Thai crisis. He spoke with NEWSWEEK’s Sonia Kolesnikov-Jessop in Singapore. Excerpts:
NEWSWEEK: Why did you buy Shin Corp.?
Jimmy Phoon
Jimmy Phoon: We felt it was a very well run company with sound fundamentals. We believe it’s a very good investment that will give us good returns. Moreover, we partnered with reputable co-investors such as Siam Commercial Bank. Underlying the investment is our belief in Thailand’s growth potential. In particular, if you look at the telecom industry, the growth will be driven not just by [Thailand’s economy] but also by the growing size of the middle-income class.
Who advised Temasek on the Shin Corp. deal?
Goldman Sachs was our international adviser and Hunton and Williams was our domestic advisor on the legal side. SCB Securities also advised us on the takeover offer in Thailand.
Did you receive any independent political risk analysis?
We did do political risk analysis as part of a detailed risk analysis, including industry risk and country risk. We are a long-term investor, and we invest purely on commercial grounds. Our investments are not predicated on which government is in power. We expect changes in environment to happen over time and we had factored in uncertainty as [we do] in all the investments that we make. There are always unforeseen developments.
Were you aware at the time of the deal that it was structured so that the seller would pay no taxes?
No, we were not aware of that. Our advisers were advising us on our side [of the transaction]. From our perspective, we’ve complied with all the laws and regulations in Thailand, and that’s really what our advisers advised us about.
Government investigators in Bangkok suspect that Temasek-backed Thai investment company Kularb Kaew purchased Shin Corp. shares on its behalf, effectively raising Temasek’s stake beyond the 49 percent legal limit. How do you respond?
We have not received any formal notification from the Ministry of Commerce regarding their review [of the sale]. Therefore it is not appropriate for us to comment. We’ve complied with all the laws and regulations and we will continue to cooperate fully with the authorities. We are confident that the outcome of the review by the Ministry of Commerce will be satisfactory as we complied with all laws. Currently, Temasek holds 41.7 percent of Shin Corp. directly through Aspen Holdings, while another 54.6 percent is held by Cedar Holdings, which is a joint venture by Temasek’s Cypress Holdings, Siam Commercial Bank and Kularb Kaew. Importantly, the majority shareholder of Cedar is Kularb Kaew, which owns 45.2 percent and together with Siam Commercial Bank controls a majority of Cedar. Kularb Kaew was not a proxy for Temasek.
There’s been speculation that you paid Thaksin’s family for their stake in Shin Corp. in offshore accounts at the seller’s request. Is that true?
This is incorrect. The transaction was done through the stock exchange of Thailand and fully paid for in Thailand. The money was paid in Thailand and there isn’t any buyback arrangement plan whatsoever.
Temasek answers to its only shareholder, the Singapore government. How has your shareholder reacted to Shin Corp.’s troubles?
We are responsible to our investor to deliver an appropriate return. All investment decisions are made by the board of Temasek, and the government does not interfere with any decision. Let’s be clear: Shin Corp remains a good investment not withstanding what has just happened. We are still invested in Shin Corp. and the underlying performance of [group] companies remains robust. Moreover, our overall portfolio is $81.1 billion [compared to] the Shin deal of $1.9 billion. It has to be looked at in that context.
Recently the Financial Times calculated that Temasek has suffered a paper loss of $820 million on Shin Corp. Is that accurate?
[They] may be quoting the difference in share price from the time when we made the investment and now, but it should be said that during that time the overall stock market in Thailand has also come down. What is very important for a long-term investor is to look at Shin Corp.’s underlying performance.
In view of the current political challenges, what’s your investment strategy in Thailand going forward?
Our investment strategy in Thailand remains unchanged. We continue to believe in the long-term fundamentals of the economy, and Thailand fits in very well with our overall investment theme of investing in rising Asian economies and tapping opportunities created by a growing middle class. We see no reason why we should change our investment strategy there.
Does Temasek accept any blame whatsoever for contributing to the fall of Thailand’s government?
Of course not!
What lessons have you learned from this experience?
We have invested in many different industries in many countries. We have to accept there will be changes in the [business] environment, the economy and the markets. That’s part and parcel of being a long-term investor.
