NEW CHARTER OF GOVERNMENT-LINKED COMPANIES

Debate resumed.

Mr Deputy Speaker: You may continue, Mr Iswaran.

Mr Iswaran: Sir, I also wanted to make some comments on the issue of divestment. There have been repeated calls by several Members that there should be a specific timeframe for the Government to announce how it is going to release or divest its interests in various companies. I was thinking about this. From whose point of view is it desirable for the Government to commit to such a specific timeframe? From the point of view of the employees of the company, who would then be filled with uncertainty about their future? From the point of view of the customers of these companies, who will then need to know what is going to happen to their supplier or service provider? Or from the point of view of its shareholders, who will then have to wonder whether this company they have shares in is in play, and what they would do about it?

The other aspect of divestment is who to divest to. There were some comments that maybe we should divest it to private equity houses or large pension funds. I think there may be some merits in that, but certainly not as a way to argue a case that this is superior necessarily to Government shareholding. I think that remains to be proven. Yesterday, Minister of State, Mr Raymond Lim, made an eloquent point on this, and I do not wish to repeat that, other than to make the point that it is not an axiom that when you privatise entirely a company, its performance necessarily improves unambiguously. If you look at the history of privatisation, in Singapore's case, privatisation was not the result of under-performing state-owned enterprises which were put into the private domain, in order to subject them to greater disciplines and, therefore, higher performance. If you look at the comparison with, say, UK, a lot of the privatisation was because the state-run enterprises were not performing. So we need to keep that in balance.

Who else can we divest to? Strategic partners? And I think that is a good idea, but it would take time, and it needs to be calibrated because you need to choose and work out the issues, before it is done.

Finally, management. I thought this deserves particular comment because this issue of MBOs was raised by several Members. I thought it was interesting because it came from two points of view. Some Members, like Mr Sin Boon Ann, said that MBO is perhaps not a very good idea, and he cited the fact that MBOs mean that management, which has got an information advantage, would be able to prevail and take advantage of the situation. In other words, there is information asymmetry which works to the disadvantage of shareholders. The question to ask: is this not true of all MBOs? So, do we then say that all MBOs as a class of transactions are a bad thing?

Another group of our Members here have pointed out that the MBOs should be encouraged because it is a way to entrust some of these assets to local management in order to kick-start the local entrepreneurship drive. Is that really the basis on which we want to consider MBOs?

The right approach really ought to be that an MBO is one way of divesting, just as there are numerous other ways. And what we ought to be looking at, if we are going to debate such issues in this House, is how we can realise the best value for the shareholders and act in the best interest of the company. I think that really ought to be the governing principle for these issues and as a result, there would be a rigorous evaluation of alternatives.

Sir, in all these questions, I think the key point is ultimately, who should be the judge of a company's business strategy, its approach to divestment or any of the other commercial decisions. Should it be the Government? Should it be the employees? Should it be this House? I would submit that whilst all these groups have got an element of interest as stakeholders, ultimately the only real point of decision, the only court of opinion, for listed companies is the community of shareholders. Why? Because they have skin in the game, and they are the ones who will make the decision whether to put money in, take it out, and so on. So we have to be mindful of that. And I think Government, no matter how large or small shareholder it is, in any enterprise, cannot ride roughshod over the interest of other shareholders.

As a final point, I just want to say that the debate has been perhaps cast as a zero sum if not negative sum game. In other words, if the GLCs grow, the SMEs are deprived. And if we cut down on the GLCs, the SMEs will grow. I think this is a little bit different to the spirit of the Motion which, when I first read it, I thought it was very conciliatory and positive. But the debate itself has had a slightly different tone, in my view. What we ultimately want is an enterprise ecosystem that affords the space and opportunity for all species of companies. If you take a rain forest, for example, you want the giants who will reach for the sky and they will compete with the other giants. We also want other companies who will look at the slivers of sunlight and other possible advantages in order to carve themselves a niche and grow. And then you will have others who will be on the forest bed, who will find their own area of operation and flourish. And I think if this debate can set that mindset for us, so that we have a new way of thinking of a relationship between all the elements of our enterprise ecosystem, then it would have been a positive exercise.