Wikileaks' Stunning Revelations about Singapore's Corporate Elite

Something that particularly piqued my interest today was the profound Wikileaks revelations about the Island Power saga, and Singapore's corporate sector in general.

Island Power is an 800MW independent power producer (IPP) gas-fired power plant in Singapore that recently (mid 2011) achieved financial close and commencement of construction. It competes with the three large Gencos, Senoko Power, PowerSeraya and Tuas Power that were formerly owned by Temasek Holdings and that were privatised to foreign investors in 2007-2008. Island Power also competes with two GLCs in the Singapore power sector, namely Keppel Merlimau Cogen (Keppel Corp) and Sembcogen (Sembcorp Utilities).

The development of Island Power has taken a very long time, and goes as far back as 2000, when the original sponsor of the project, Intergen, got a license from the Energy Market Authority (EMA) and started the process to develop the power plant in Singapore. However, for more than 10 years, Island Power was beset with delays, ostensibly regarding their ability to procure access to a natural gas pipeline supply from Indonesia and other reasons. Wikileaks, however, has revealed more or less everything surrounding the delay (and subsequent abandonment) of Island Power in the hands of Intergen:

"For about six years Singapore Temasek and its subsidiaries have deliberately and successfully blocked efforts by Intergen and local subsidiary Island Power to access an offshore gas pipeline between Indonesia and Singapore.  While the GOS was taking public steps to encourage competition and liberalize its gas market, Temasek was working hard to block potential competitors (ref D), claimed Michael Reading (protect), Managing Director of Island Power.  Reading said that Temasek at various points threatened personal defamation lawsuits, claimed it "controlled the government," and pledged to "frustrate" Island's efforts to operate in Singapore."

It turns out that the real reason that Island Power faced so much problems getting off the ground was because of anti-competitive behaviour of Temasek Holdings, which through its influence in the government, was blocking access by Island Power to a natural gas pipeline essential to its operations.

It took a year for EMA to respond to an application Island filed requesting that EMA step in and finally decide whether Island could access the pipeline.  EMA's response was a published directive that stated Island would have to secure a new gas sales agreement from a supplier in Indonesia and negotiate an allocation agreement with Gas Supply Pte Ltd, a subsidiary of Temasek, in order to share the pipeline.  

EMA stated that the allocation agreement with Gas Supply would be essential to the final decision-making process to prevent future contractual disputes that might negatively affect the downstream supply of gas to Singapore.  However, the allocation agreement would require Island to go back into negotiations with Temasek, the company that from the beginning opposed Island's entry into the domestic power sector.  Such negotiations would likely result in years of litigation, Reading said.

But what is surely the most interesting is the revelation that the EMA, and MTI, are politically second fiddle to Temasek executives, and that by extension, the bureaucracy of Singapore serves the interests of Singapore's corporate elite:

Reading thought that EMA, which was established in 2001 as an independent statutory board under the Ministry of Trade and Industry (MTI), was well intentioned but seemed to bow to considerable pressure from Temasek.  A consultant at public relations firm Fleishman-Hillard helped arrange meetings for Island with members of Parliament the consultant believed might be sympathetic to Island's plight.  The MPs, who were all members of the ruling People's Action Party (PAP), indicated that Island could not rely on MTI (and EMA) to stand up to Temasek because MTI Minister LIM Hng Kiang is "weak" and not part of the PAP "inner circle," Reading claimed.

I was quite stunned when I read this paragraph - stunned about the power structure between Temasek and the Government, and stunned that PAP MPs would care to reveal the "truth" to Intergen so callously.

Now we truly understand what Temasek means when it says that it acts independently of the government like any other investment firm. A certain Temasek Executive, Myrna Thomas, made the following comments in the Straits Times in March 2007 following the Ship Corp saga:

Temasek operates with commercial discretion and flexibility as a commercial investment company. Like other investment firms, our investment decisions are based on commercial considerations within the appropriate risk-adjusted return framework for the different industries and markets.

Indeed, we now know that Temasek does not take instructions from the Government of Singapore. Instead, it is the Government of Singapore which takes instructions from Temasek Holdings and which bends over backwards to serve the interests of Singapore's corporate elite - which primarily consists of Temasek and its GLCs.

In retrospect, this should not be too surprising. This state of affairs is very much like the United States, where banks and their lobby groups exert tremendous power over Government policy. Economic advisors to the US Govt and several prominent economists in the Federal Reserve are sympathetic to the interests of American corporate elite, and are in many cases paid and funded by bankers and the rich.

Now you know why Tony Tan must be the president and not Tan Cheng Bock or Tan Jee Say. This is because Tony Tan has been a blue-chip corporate elite for decades and will surely protect the interests of GIC and Temasek executives. Radical Tan Jee Say, however, has blasphemed against the Temasek order by suggesting that the GLCs should be divested and privatised. And Tan Cheng Bock cannot be counted upon to be malleable to the interests of Singapore's Sovereign wealth funds.

Indeed, the office of the presidency is critical to maintaining the power structure of the elite in Singapore. For the longer they can maintain their stranglehold over Singapore's reserves and the corporate sector, the longer they can maintain their profits, fat salaries and fat bonuses via anti-competitive measures.