History of Temasek

Three years after an unexpected independence in 1965, Britain announced it would accelerate the withdrawal of their armed forces from Singapore, to complete by 1971. This would dent Singapore’s economy, with a commensurate impact on the workforce, as a fifth of economic activity was attributed to the British forces and its industries.

Retraining soon followed apace to prepare the working population for the new jobs being created through massive industrialisation and investment promotion. British naval military dockyards and electronic workshops were converted and transformed into commercial start-ups and civilian businesses. The amalgamation of these efforts saw Singapore deliver a robust 12% economic growth in 1971, averting a potential economic disaster.

In 1972, Dr Goh Keng Swee, the first Finance Minister of Singapore (1959-1965, 1967-1970), who was then Minister for Defence, said:

“One of the tragic illusions that many countries of the Third World entertain is the notion that politicians and civil servants can successfully perform entrepreneurial functions. It is curious that, in the face of overwhelming evidence to the contrary, the belief persists.”

Having converted the military and naval bases left behind by the British forces to commercial use, and then finding itself the owner of a variety of these new businesses, the Government felt that it was necessary to separate governance from business management. This stemmed from the principle that it was not the business of government to operate the businesses it owned. At Temasek’s 40^th anniversary in 2014, then President of Singapore, Dr Tony Tan Keng Yam, noted in his address:

“It was clearly not the business of government to run such enterprises, and so Temasek was set up to take over and own some 35 companies and miscellaneous investments”.

It was this principle that led to the establishment of Temasek to own and manage the assets previously held by the Singapore Government. The objective of a commercial investment company, owning and managing these assets, was to allow the government to focus on its core role of policymaking and regulations. Further, Temasek was designated a Fifth Schedule Entity with the constitutional responsibility to safeguard its past reserves, underscoring its role as a steward. The creation of Temasek therefore served to separate the regulatory and policymaking function of the Government from its role as a shareholder of commercial entities.  

Defining Temasek by comparing to others is not easy; there are no others that have the same breadth of Temasek’s activities, even today.

While the Government is the sole equity shareholder of Temasek, Temasek owns its assets outright as a commercial investment company, governed by the Singapore Companies Act, rather than being a fund manager for the Government.

Temasek declares dividends annually to its shareholder. Despite being an exempt private company, Temasek has voluntarily published its annual financial and performance report, the Temasek Review, since 2004. And Temasek pays taxes, just like any other company, in Singapore and anywhere else in the world they fall due.

As a commercial company, Temasek is governed by an independent board, the majority of whom are non-executive and independent private sector business leaders.  

The evolution of Temasek towards full responsibility for the appointment and renewal of Board and management personnel was articulated by former Temasek Chairman Mr S Dhanabalan (Chairman of Temasek Holdings, 1996-2013), at Temasek’s 39^th anniversary dinner, where he shared:

“Entrusting of the board and management to conduct business and to plan and execute succession without political interference makes us unique in the community of state-owned enterprises.”

Speaking at Temasek’s 40^th anniversary dinner a year later, then President of Singapore, Dr Tony Tan Keng Yam, further remarked that it was this clear distinction of role that allowed Singapore firms to be “free of political patronage and compete on level playing field”.

The relationship between Temasek and its sole shareholder, the Minister for Finance, is similar to the relationship between Temasek and its portfolio companies. Neither the President nor the Government is involved in Temasek’s investment or other business and corporate decisions, except in relation to the President’s role in the protection of Temasek’s reserves. Similarly, Temasek does not direct the business decisions and operations of its portfolio companies. Instead, Temasek expects the boards and management of these companies to take responsibility and accountability for their actions and activities. For instance, Singapore Airlines (SIA) makes independent decisions on the selection of its aircraft and routes based on commercial considerations, without any direction from Temasek. As former Temasek Chairman Mr S Dhanabalan shared back in 2010, “When Singtel wants to buy the second largest telecoms company, they did not consult Temasek. When SIA bought billions of dollars of planes, we only read about this in the newspaper.”

Over the years, successive Finance Ministers, from Mr Hon Sui Sen (Finance Minister 1970-1983) to Mr Heng Swee Keat (Finance Minister 2015-2021) have also publicly affirmed that Temasek is expected to be run with commercial discipline. During an interview in 2019, Mr Heng Swee Keat expressed, as then-Finance Minister, that he had never interfered with the investment decisions of Temasek and GIC. He added that according to the Constitution, the Finance Minister is responsible to Parliament for the performance of these firms, and he in turn holds these firms accountable.

This same perspective is shared in Mr Heng’s responses to various parliamentary questions. For example, in a written response to a parliamentary question in 2016, Mr Heng shared:

“The individual investments of GIC and Temasek are the responsibility of their respective management teams, while the Government monitors the performance of their overall portfolio. GIC and Temasek operate on a purely commercial basis in order to maximise long term risk-adjusted returns, and the individual investment decisions are fully independent of any Government interference or influence. This is an important governance principle that we seek to maintain.”

In his address at Temasek’s 39^th anniversary dinner in 2013, then Deputy Prime Minister of Singapore and Minister for Finance, Mr Tharman Shanmugaratnam, explained:

“On its part, the Government’s approach is to ensure that people of sound character and judgment are appointed to the [Temasek] Board, to guide Temasek’s management and its strategies… This alignment in our thinking on the governance of Temasek remains an important advantage for the future. The Government holds the Board accountable for Temasek’s performance over time. Temasek has the flexibility to seize opportunities when they arise, and to take calculated risks aimed at growing the value of its portfolio over the long term.”

Over the years, Temasek has set its priorities with oversight from the Temasek Board, and independent of government direction. Its portfolio was shaped, and reshaped, alongside the risks and opportunities that present from time to time, and the longer term trends that were developing globally.

Opportunities delivering good returns were sought, expanding Temasek’s presence from Singapore into Asia, Europe and the US. The rigour of commercial discipline was applied to those investments that were not performing; some were closed, others were sold as part of a wider industry consolidation.

Temasek was born with tomorrow clearly in the minds of its founding fathers. The core reasoning was delivering a better world through its investments, safeguarding its reputation and ethos of good governance, and building upon the inheritance for future generations. These principles remain as relevant today as they did in the early 1970s, and are manifested in Temasek’s Charter; it articulates Temasek’s role as a global investment company rooted in Singapore, which operates on commercial principles to deliver sustainable returns over the long term.

Temasek was incorporated in 1974 to commercially manage an initial portfolio valued at S$354 million, acquired from the Singapore Minister for Finance. This decision enabled the Singapore Government to focus on its core role of policymaking and regulations.

Of the 35 companies in our initial portfolio, 10 still remain, directly or indirectly, as shown in bold and in blue. Others have been divested or liquidated, as we invested, divested and grew our portfolio to S$389 billion.

1. Acma Electrical Industries Ltd
2. Cerebos Singapore Pte Ltd
3. Chemical Industries (F.E.) Ltd
4. Development Bank of Singapore Ltd
5. Instant Asia Cultural Shows Pte Ltd
6. Insurance Corporation of Singapore Ltd
7. International Development and Construction Corporation
8. Intraco Ltd
9. Jurong Bird Park Pte Ltd
10. Jurong Holdings Pte Ltd
11. Jurong Shipbuilders Pte Ltd
12. Jurong Shipyard Pte Ltd
13. Keppel Shipyard Ltd
14. Metrawood Pte Ltd
15. Ming Court Hotel Ltd
16. Mitsubishi Singapore Heavy Industries Pte Ltd
17. National Engineering Services Pte Ltd
18. National Grain Elevator Ltd
19. National Iron & Steel Mills Ltd
20. Neptune Orient Lines Ltd
21. Primary Industries Enterprises Pte Ltd
22. Sembawang Holdings Pte Ltd
23. Singapore Airlines Limited
24. Singapore Airport Duty-Free Emporium (Private) Limited
25. Singapore Cable Car Pte Ltd
26. Singapore General Aviation Service Company Pte Ltd
27. Singapore National Printers Pte Ltd
28. Singapore Offshore Petroleum Services Pte Ltd
29. Singapore Textiles Industries Ltd
30. Singapore Treasury Building Pte Ltd
31. Singapore Zoological Gardens
32. Singmanex Pte Ltd
33. Sugar Industry of Singapore Ltd
34. United Industrial Corporation Ltd
35. United Vegetable Oil Pte Ltd