Parliament: Temasek might "feel pressure" to meet demands of rising government spending

A spending rule allowing the Government to use up to 50 per cent of Temasek Holdings' long-term expected returns, might put pressure on the investment company to deliver results, said Nominated MP Randolph Tan on Monday.
A spending rule allowing the Government to use up to 50 per cent of Temasek Holdings' long-term expected returns, might put pressure on the investment company to deliver results, said Nominated MP Randolph Tan on Monday.PHOTO: ST FILE

SINGAPORE - A spending rule allowing the Government to use up to 50 per cent of Temasek Holdings' long-term expected returns, might put pressure on the investment company to deliver results, said Nominated MP Randolph Tan on Monday.

He was speaking during the debate to amend the Constitution to include Temasek Holdings in the existing Net Investment Returns (NIR) framework.

The framework, set up in 2009, allows the Government to spend up to half of the long-term investment returns on the net assets managed by the Monetary Authority of Singapore (MAS) and GIC.

The proposed constitutional amendment, debated in Parliament on Monday, will allow the Government to apply the framework to Temasek as well.

Prof Tan asked if a lower limit should be imposed on Temasek, since there is "recognition of the different nature of the investment remit of Temasek".

 

He said there are a host of risks to contend with when estimating the value of Temasek's returns.

"Even if the investments themselves performed well, there are country risks, exchange rate risks, business cycles. Then there are the more severe risks associated with fluctuating global economic conditions, something which Singapore will always be more exposed to than others," he said.

While Temasek has "proven itself more than up to the task" in handling these challenges, Prof Tan added, there were no guarantees that this state of affairs would continue.

"As our democracy develops, the question should also be asked as to whether there could come a time when the decision we make today becomes a burden on Temasek to deliver results."

Market volatility has been increasing in recent years, he said, and this should make the Government more cautious in tapping on Temasek's NIR.

The move to include Temasek in the NIR framework was first announced by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in February, when he set out the national Budget for this year.